Peak oil interview

KB, we have at least one member that makes his living in the oil patch. I see you found the subforum, and you'll find quite a bit of information supporting that interview in it.

 

Very good article. Thanks for posting it. I have taken a few snippets to point out the entire scenario without having to read the entire thing. It sums it up fairly well and is of special interest due to how recent the interviews were. A lot of opinions and forecasts have changed since 2008. A lot of eyes are opening.

Dr Jeremy Leggett, author of Half Gone about peak oil, on their latest risk report done by UK Industries.

Jeremy Leggett: Three years ago (2008)a few companies got together in a sort of ad hoc way because we had concerns about the high oil price, and we decided to do a sort of business risk assessment of the peak oil issue.

But by the end of the exercise, a year of looking at the risk assessment, we were all of the view that this is a very high consequence and very high risk issue, and that we need to respond to it proactively; governments, companies, communities. And that was our message in our first report in 2008, reiterated in our second report in 2010. And we think that this problem is actually as bad, if not worse, than the credit crunch. We say this in the foreword, the chief executives and the chairman of the companies, to our second report because it's going to come down on a world economy that is oil dependent, nay, oil addicted, as a great surprise when oil supply begins to descend, maybe even collapse. This is a huge whistle that we are trying to blow.

the thing about this is that whereas in the run-up to the credit crunch the whistles were being blown by a handful of maverick economists and one or two farsighted journalists like Gillian Tett at the Financial Times, this time you've got a cadre of people in and around the oil industry itself, generally individuals, but also a number of companies who have looked in depth at the problem, and we are saying, Houston, this is a problem. We need to be doing something about this, we need to be acting ahead of the crunch to buy ourselves time and soften the landing. And I have to say we are not having very much success with getting anyone's attention

there is a view that there isn't a problem here. If you talk to BP and many of the other oil companies, that's the view that you will get, and the government has been told this. But also I think very definitely there is a sort of desperation to believe the comforting narrative if your choice is the uncomfortable narrative and the comforting one. And I personally find that everywhere, in government, in industry, people do not want to believe that there is a problem with the life blood of modern economies. They just don't.

The oil crunch is when global supply fails to meet demand and starts to drop, and arguably we fear starts to drop so fast that you would almost call it a collapse. What our economies are locked into is the inherent assumption that actually demand keeps growing, as it does, fed primarily these days by India, China and the Middle East, and it will just go right on growing, and somehow we will be able to keep the supply track growing with demand.

And this is what we are saying, we are saying that that narrative is no longer believable. There are so many problems with conventional oil and unconventional oil that on the massive balance of probabilities, by 2015 at the latest in the view of the industry task force, there will be a descent of global oil production. That will cause a crunch, it will cause the price to go through the roof, it will cause price volatility and all the downsides that come with a fabulously expensive and, in some cases, simply unavailable oil.

Fatih Birol is the chief economist of the International Energy Agency.

Fatih Birol: The news is not very bright. On the one hand we see that the global oil demand will increase substantially.

On the one hand we have this pressure on the demand side, but when we look at the production side the prospects are a little bleak. We think that the crude oil production has already peaked in 2006, but we expect oil to come from the natural gas liquids, the type of liquid we have through the production of gas, and also a bit from the oil sands. But in any case it will be very challenging to see an increase in the production to meet the growth in the demand, and as a result of that one of the major conclusions we have from our recent work in the energy outlook is that the age of cheap oil is over. We all have to prepare ourselves, as governments, as industry, or as a private car driver, for higher oil prices.

Jonica Newby: Just five years ago your organisation was saying no peak oil in sight, and we will get up to 120 million barrels of oil a day by 2030. You've revised those estimates down substantially. Has there been a real change of opinion here?

Fatih Birol: No, what we have done is in the year 2008 we had a look at 800 oil fields on a field by field basis. It is the most detailed study ever carried out in the world, and we have seen that the decline rate, the decline in the existing fields, are very, very deep. And since four or five years we are underlining one message, namely the existing fields are declining so sharply that in order to stay where we are in terms of production levels, in the next 25 years we have to find and develop four new Saudi Arabias. It is a huge, huge challenge that we continue to underline. And on top of that, this would mean that the world's reliance in terms of oil supply would be on a very few number of countries in the Middle East. So you have both the financial aspect, you have the geological aspect, and you have the geopolitical aspect of the growing reliance on oil.

Jonica Newby: Dr Birol, are you personally worried?

Fatih Birol: I am personally worried because of the general picture. There are different levels of my worry. The first one is that I see that in the next years to come oil and geopolitics will be more and more interwoven...

Jonica Newby: You mean war?

Fatih Birol: It can be different types of that and I do not like it. I would like to see oil industries remain as a business, as a part of the economic structure, but I am afraid that there will be more and more intersection between oil and geopolitics.