Thoughts on the IEA’s World Energy Outlook 2009

The latest from the IEA is hot of the press. I’m curious to see what they have to say this time around, because their stance on oil supplies has shifted quite a lot recently. They used to believe oil supplies would last for a long long time, but are now saying 2020 will be the peak of production.

Apparently the report claims a connection between the high oil price in recent years and the financial crisis, which others have been saying for a while, but it would be interesting to hear that from an institution like the IEA. So far I’ve only gotten my hands on the executive summary, which makes no mention of that though.

Other than the eye popping trillion dollars of investment needed each year to ensure oil supply keeps up with demand (last year they were saying only 360 billion…), here are a few things which jumped out at me from the summary:

Quite conservative estimates for oil prices (already too low!)
“Oil prices are assumed to fall from the 2008 level of $97 per barrel to around $60 per barrel in 2009 (roughly the level of mid-2009), but then rebound with the economic recovery to reach $100 per barrel by 2020 and $115 per barrel by 2030 (in year-2008 dollars).”

Acknowledgement of the fact that 450ppm will give us only a 50% chance of hitting the 2 degrees of warming target
“To limit to 50% the probability of a global average temperature increase in excess of 2°C, the concentration of greenhouse gases in the atmosphere would need to be stabilised at a level around 450 ppm CO2-eq”

It ends with an urgent call to action on climate change
“A critical ingredient in the success of efforts to prevent climate change will be the speed with which governments act on their commitments. Saving the planet cannot wait. For every year that passes, the window for action on emissions over a given period becomes narrower — and the costs of transforming the energy sector increase. We calculate that each year of delay before moving onto the emissions path consistent with a 2°C temperature increase would add approximately $500 billion to the global incremental investment cost of $10.5 trillion for the period 2010-2030. A delay of just a few years would probably render that goal completely out of reach. If this were the case, the additional adaptation costs would be many times this figure. Countries attending the UN Climate Change Conference must not lose sight of this. The time has come to make the hard choices needed to turn promises into action.”

SeekingAlpha have done a summary of the executive summary, for the truly rushed among us.

10 Comments Posted

  1. Gently now! We must give IEA and Messieurs Tanaka and Birol their due. They actually ARE telling us the truth about oil.

    “”WEO-2009 provides both a caution and grounds for optimism. Caution, because a continuation of current trends in energy use puts the world on track for a rise in temperature of up to 6°C and poses serious threats to global energy security…” One does not have to read too far between the lines of that to discern that IEA is saying that the threat to global energy security is not CAUSED by climate change, its caused by the continuation of the current trend of us burning oil.

    Tanaka says:”… there are cost-effective solutions to avoid severe climate change while also enhancing energy security.” What he means is that since we are not heeding the IEA’s calls that “…the world must move away from oil before oil moves away from us…” (Tanaka, a year or so ago) then hopefully we will heed the climate change message and reduce emissions BY reducing oil consumption and hence enhance our oil security.

    “WEO-2009 also identifies higher oil prices, coupled with the downturn in oil sector investment, as a serious threat to the world economy, just as it is beginning to recover. As a result of the financial crisis, investment in upstream oil and gas has already been cut by over $90 billion this year compared with 2008. ”

    What does that tell us? Its not hard!! The downturn in oil sector investment poses a serious threat BECAUSE there won’t be enough oil to drive the recovery. Kinda black and white that one.

    Tanaka: “Calling for increased investment in fossil-fuel supply is not inconsistent with the need to move to a low-carbon energy pathway.” Very true sir! If we spend more on getting the remaining oil out of the ground and into the atmosphere, then it will simply run out of viable oil supplies sooner, climate change and sea level rise will accelerate for the worse, and we will indeed ‘move to a low-carbon energy pathway’ even faster.

    “…This glut [in gas supplies] could have far-reaching consequences for the structure of gas markets, “. Yes. By reducing the price of gas there will be less incentive to look for more. Gas fields have the unhappy habit of ending output much more abruptly than oil fields, and we don’t know the tank is almost empty until it happens. Less investment means less depth to the supply, and a faster decline. The conversion of gas to transport fuel is not very economic, and there are no meaningful efforts to ramp up that conversion to any meaningful volume nor to convert the vehicle fleet to use it. So gas is a side issue to the main transport-related oil supply problem.

    In the past 12 months IEA’s official releases, and both Mr Tanaka and Dr Birol have made clear statements concerning the very perilous state of our conventional energy supply. Not least among these statements is that the world needs at least another Saudia Arabia to sustain conventional oil production at present day levels, and three or more to satisfy the G8’s global growth expectations between now and 2030.

    Their views are of course supported by various other recent works that confirm the sad state of the oil business. Of particular relevance is the recent report from UK; The Global Oil Depletion Report: Launched 08.10.09

    which observes:

    “…approximately 3 mb/d of new capacity must be added each year, simply to maintain production at current levels – equivalent to a new Saudi Arabia coming on stream every three years…
    …more than two thirds of current crude oil production capacity may need to be replaced by 2030, simply to prevent production from falling. At best, this is likely to prove extremely challenging.

    Technical Report 7:

    …This implies that a peak of conventional oil production before 2030 is very likely, and a peak before 2020 is probable. To reach a different conclusion, it would be necessary to argue for either a significantly larger global URR and/or a more rapid post-peak decline rate (which has implications of its own). However, there are a number of caveats to this conclusion, including the following: … “etc.

    And some interesting commentary on the plausibility (or lack thereof) of WEO 2009 –

    The IEA has a very difficult balancing act to do between telling those who will hear the truth, and keeping the current markets in some sort of state of equilibrium. Some suggest the ‘truth’ would panic the market. Whether that is the case or not for the ordinary man is irrelevant. The IEA has told us the truth.

    We don’t need to hear or read it again wrapped up in another glossy cover. We know enough. We know that in ten years, maybe less, the primary fuel source for our global growth-based economy is in steep and eternal decline.

    It is well past the time when we should as individuals and a nation have started to make alternative arrangements.


  2. If one picks it as the peak rate of extraction which is the way it ought to be defined, the peak was late 2005. One notes that we have NEVER exceeded that rate since and that demand falls with the price increases (and efficiency is given more attention at the same time) and as a result there is scant appetite for pumping more given the hefty prices required to extract what is left.

    Which partially explains Saudi Arabia asking for aid in the event that the West cuts back further on consumption. The recession HAS hurt them.

    However, one might also ascribe the request to someone in their government having a set of “big brass ones”.



  3. sleepyday – even if they said next year that peak oil is now (meaning 2010), they might still not be telling the truth, which could well be that peak oil has already occurred!


  4. BBK, I am not always an optimist. I recommend that you prepare for (preventing) this scenario: people see that there is writing on the wall, and pick the nastiest government possible, hoping that it will fall on somebody else and not them.

    I am also not consistently moral, and can begin to imagine situations where I might do this myself 🙁

  5. To get politicians to speak without forked tongue is nigh on impossible for the simple reason that their voters do not want to hear the truth. With the notable exception of Green Party Members of course. However there comes a time when even the blind will see. A tipping point is coming in world affairs, which may be bloody, but necessary for survival.

    One can easily see that the machinations going on in the Obama Administration point to the struggle he is having with the real powers in the land i.e. those in control of the finances & according to reliable sources, the Cabal of several hundred powerful people who will never willingly let go of the reins.

    There must come a time when ‘the people’ will no longer tolerate this death struggle between these forces & attempt to take control. Heaven help the poor & powerless then.

    Being an optimist, I firmly believe that Copenhagen will see the first real split in the Cabal, leading to a world wide ‘revolution’, a paradigm shift among voters, who will turn the world upside down & inject at least some sanity into world affairs.

    The first real effects of this will be seen in the British Parliament next year after the General Elections. We will see around half of current Parliament thrown out & a new alignment of power. Elections in NZ aren’t far away – Goodbye John ! The people are awakening.

  6. Its interesting isn’t. In their 2008 report they put an estimated peak oil timeframe of 2030. This report they are suggesting 2020 – perhaps they will actually come clean next year and admit that peak oil is now!!!

    The interview George Monbiot did last year with the head economist for this report is quite telling:

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  7. Every year, they rein in one or other of their forecasts. So why do governments place so much faith in each one? It truly beggars belief. If their forecasts change so much each year, why are governments basing policy (or the lack of policy) on any of the reports?

    Kjell Aleklett claims that the IEA have been lying for many years. Isn’t it about time our government sponsored some independent research into when oil production might peak (if it hasn’t already) and what the price profile will look like over coming years? The IEA, amazingly, talk about oil prices only in the US$115 range by 2030 (in 2008 US$). If they are forecasting peak by 2020, then surely prices will be through the roof a decade after that? With the kind of investment being made in roading projects, it is madness to continue to do that if oil has already peaked or will reach unaffordable prices in the timeframe of those projects, or shortly afterwards.

    Some thoughts from Richard Heinberg on the controversy.

  8. Can we handle the truth?

    by Guy R. McPherson

    The International Energy Agency (IEA) released World Energy Outlook 2009 today. Even before the sham was shipped, it was exposed as a big ‘ol bucket of lies. Seems the current administration thinks Americans can’t handle the truth, so we need to apply some pressure to keep the lid on the facts. If this country’s paragon of transparency (i.e., world’s leading liar) and master of hope (i.e., wishful thinking) actually trusted the American people, perhaps we could avert chaos.

    If oil traders knew the truth about declining energy availability, the per-barrel price of oil would be $300 within a week. If stock traders knew the truth, we’d see capitulation of the markets shortly thereafter. If Americans knew the truth, they just might come to grips with reality, rally together, put their collective shoulders to the wheel, and start building a better world than the ominicidal culture of make believe to which we’ve all become accustomed.

    But we’ll never know, because the cabal of morally bankrupt bankers and politicians running this country — and also the industrialized world — will keep playing the shell game as long as they are allowed by the impotent media. Or, more likely, until the reality of oil priced in excess of $200 per barrel interferes with their imperial ambitions.

    The consequences of the shell game extend well beyond economic disaster and the likely extinction of our species. In the short term, they include hijacking the world’s marketplace, complete with child labor, hunger, and pollution (especially abroad), continued decline of intellectual “capital” in our universities, ratcheting up the war machine by attacking yet more countries (perhaps bringing a rapid demise to American Empire), further extending imperial overreach, continued shrinking of our credit-based economy, continued enrichment of the financially wealthy (including $100 billion for eight of Warren Buffett’s companies), continued profiteering by the insurance industry, and continued land grabs in poor countries by wealthy countries. All with a U.S. military on the verge of complete collapse and despite widespread acknowledgment that American-style capitalism is not working.

    To reiterate the choices facing us: (1) The economically dire truth and potential for chaos, now, or (2) Certain chaos and probable extinction, later. The moral certainty of the former choice is absolute. Perhaps that alone explains why we’re choosing door number two.

    Will reality intervene in time to save the living planet, including our own species? Is 2012 soon enough? Stay tuned. In the meantime, think about what you’d do. Let’s play King For A Day. Would you trust industrial humans with the truth? Or would you commit us to chaos and probable extinction in the name of politics? In your response, please wear two hats: first your own, then, to make the game realistic, the hat of your favorite billionaire.

  9. and the iea is lying…

    an insider-whistleblower sez they are bullshitting us..

    ..who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying..

    The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.

    The allegations raise serious questions about the accuracy of the organisation’s latest World Energy Outlook on oil demand and supply to be published tomorrow –

    – which is used by the British and many other governments to help guide their wider energy and climate change policies.

    In particular they question the prediction in the last World Economic Outlook, believed to be repeated again this year ..

    .. that oil production can be raised from its current level of 83m barrels a day to 105m barrels.

    External critics have frequently argued that this cannot be substantiated by firm evidence ..

    .. and say the world has already passed its peak in oil production.

    Now the “peak oil” theory is gaining support at the heart of the global energy establishment.

    “The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source ..

    .. who was unwilling to be identified for fear of reprisals inside the industry.

    “The 120m figure always was nonsense but even today’s number is much higher than can be justified .. and the IEA knows this.

    “Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible ..

    .. but there are fears that panic could spread on the financial markets .. if the figures were brought down further.

    And the Americans fear the end of oil supremacy .. because it would threaten their power over access to oil resources,” he added.

    A second senior IEA source, who has now left but was also unwilling to give his name ..

    .. said a key rule at the organisation was that it was “imperative not to anger the Americans” ..

    ..but the fact was that there was not as much oil in the world as had been admitted.

    “We have [already] entered the ‘peak oil’ zone.

    I think that the situation is really bad,” he added..”


  10. Or maybe the news is worse than that….

    or better

    or worse

    The thing that appears to be clear is that any economic resurgence will run into $100 oil… it will appear more as a limit to the growth addicted economics of our fractional-reserve economies than as an entity on its own.


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