It's been the talk of the blogosphere lately that there's been a lot of lyin' coming from the US Federal government. Of course, that's nothing new, and should surprise no one. Some very reputable have cited errors and outright fabrications regarding “official” unemployment figures from the Bureau of Labor Statistics, as well as lies surrounding the true effect of the various stimulus packages.
I want to focus on the unearthing of another set of lies, regarding world oil reserves and production. Yesterday, the Guardian, a British newspaper, ran an article titled, Key oil figures were distorted by US pressure, says whistleblower. According to two anonymous senior officials at the International Energy Agency, it seems that recent IEA World Energy Outlook reports have been distorted in order to present a more optimistic picture of remaining oil reserves and production figures than is warranted by the facts. This distortion is alleged to be due to pressure from the United States government, which wanted to suppress information that might damage financial markets. The pressuring of the IEA came from the Bush administration.
I'm not going to launch into a long denunciation of the IEA or of the US government in this post, although they certainly deserve it. I simply want to point out a pertinent suspicion: namely, that if the IEA has fudged remaining reserve figures, they have also probably been fudging monthly production numbers as well.
This is a suspicion which several Peak Oil watchers voiced in 2008, as oil spiked to $147 a barrel, even though IEA monthly figures seemed to indicate that global oil production was still increasing. I never was able to swallow that story. My reasoning is as follows: in 2007, global “petroleum liquids” production was around 85 million barrels a day. In the summer of 2007 the IEA announced that the world would need an extra 1.5 million barrels a day in order to avoid shortages and price spikes.
Now basic economics tells us that the price of a commodity is determined by the balance between supply and demand. When demand goes up, creating scarcity, the price also goes up until demand is limited by the higher price and supply and demand are again in balance at the higher price. Now, the global economy required a growth rate of around 2 to 3 percent per year in order for debt-based arrangements to hold together. Since energy is a foundational component of this economy, that means that energy supply needed to grow at the same rate in order to support the global economy. Oil is one of the main sources of energy for modern society, meaning that the oil supply also had to grow at a certain rate in order to support the economy without disruption.
The funny thing is that, according to the IEA, global “liquids” supply grew from 85 million barrels a day in the summer of 2007 to 88 million barrels a day in July 2008, which was the high point of the oil price spike. Yet if global supply had actually grown in step with global demand, the price should probably not have spiked at all, and certainly should not have spiked as much as it did. Something's fishy about the 88 million barrel per day number.
And that (along with the other lies we've been hearing about over the last few days) illustrates a further point. As our economic and energy situations continue to deteriorate, the masters of our present systems will present an increasingly distorted picture of our situation, a story that is increasingly disconnected from reality. They will do this so that they can maintain as much control and guard as much of their revenue streams as possible. Those who want to find out the truth about our situation will have to be good detectives. Those who don't care, who prefer to live disconnected from reality, will increasingly be surprised by the nasty intrusion of reality into their daily lives.
As for me, I'm a lot more inclined to believe the Oil report of the German Energy Watch Group, which says that global oil production has already peaked.