A Year Of Consequences

There has been much to chew on recently for those who have been following the discussion of limits to global oil production. The latest round of news started with the widely publicized news that two unidentified whistleblowers from the International Energy Agency were accusing the agency of painting a much more optimistic picture of remaining petroleum reserves than is warranted by the facts. According to the whistleblowers, it was pressure from the United States that induced the IEA to make misleading and false statements, in order to prevent “panic” or the emergence of threats to American access to the world's oil supplies.

This was followed by a statement from Professor Kjell Aleklett of Uppsala University in Sweden, in which he flatly stated that the IEA prediction of 105 million barrels per day by 2030 is “unrealistic.” In Mr. Aleklett's view, global petroleum production is more likely to be 75 million barrels a day in 2030. The salient point of the Uppsala forecast is that in their view, global oil production has already passed its peak, and will decline from here onward.

An increasing number of independent analysts, academics and oil industry insiders is saying the same thing – that the world has passed Peak Oil and that we are now living in the twilight of the petroleum age. More and more “coal mine canaries” are singing from the same sheet of music. The only matter of debate among these experts is whether the decline will be gentle and lengthy, or whether it will be drastic and sudden.

I'm not an oil industry expert or a geologist. But I have always been partial to the Oil Report of the German Energy Watch Group. Part of my preference has been that this report contained some pretty drastic near-term predictions, and thus it would be easy to see fairly soon whether the Energy Watch Group was on the right track. Their salient prediction was that global petroleum liquids production (consisting of the sum of conventional crude, natural gas liquids, “oil” from tar sands, and biofuels) would shrink from around 85 million barrels per day in 2007 to around 58 million barrels per day by 2020. This is a fairly steep decline, and if the Oil Report is correct, we should begin to see the proof fairly soon.

Now another analyst has generated a report containing similarly drastic predictions. Tony Erickson, a volunteer analyst at the website The Oil Drum, has just posted his latest “World Oil Production Forecast - Update November 2009‎.” His key points are that crude oil production (excluding biofuels) has already peaked, and that global oil production will decline by 2.2 million barrels per day each year between now and the end of 2012. Thus the German Energy Watch Group has been joined by another voice predicting a drastic near-term drop in global oil production.

If Mr. Erickson is correct, this means that by the end of 2010, the world will be producing 2.2 million barrels per day less than it is producing now. Due to the critical role of oil and petroleum products in the global economy, this means the very real probability that the global economy will shrink involuntarily and uncontrollably. Many things that people in the First World are used to having will become much more expensive and/or unavailable. 2010 may well be the year of another oil price superspike. Thinking of the implications for the fragile global economy may wreck your sleep tonight.

In America, many of us may have to make sudden, drastic adjustments for which most of us have not been forewarned, and which most would have rationalized away even had they known. Whereas some European nations like Germany and the Netherlands will be structurally more suited to a world of lower energy (think bicycles and mass transit, just for starters), we may find ourselves scrounging for hastily thrown-together means of adaptation. Better make sure your bike has a good lock.

Some might say that predictions like these are unnecessarily “alarmist” or even “apocalyptic.” Maybe so, maybe not. We won't have long to wait to find out. As Wallace Stevens once wrote, “Let be be the finale of seem...”