If we were at peak oil, wouldn't markets want to know?
November 10, 2009, 3:58 am
Filed under: Business
| Tags: Business
, Extraction of petroleum
, International Energy Agency
, Kevin Drum
, Oil reserves
, Peak oil
This Guardian article saying that whistleblowers at the International Energy Agency are routinely deliberately putting out inflated figures for potential future oil production in order to avoid panicking the world market with the real figures is certainly interesting. And it’d be nice if oil production were hitting a wall, forcing radical increases in the price of fuel and thus pushing a transition to a non-carbon economy even without the need for cap-and-trade or massive carbon taxes. But the whole logic seems weird to me. Kevin Drum says there’s no way to know what to think of it, and while it sounds sort of plausible:
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.
…but would anyone really try to hide information like this from the markets? By what mechanism could an organization systematically raise its real estimates of future production by 20% or more without leaving all kinds of holes in the analysis? And isn’t any attempt to conceal information like this merely postponing and exacerbating the real buying panic when the actual limits on production start to become transparently clear? Wouldn’t you want pessimistic estimates like this out there as early as possible, 10 or 15 years in advance, so as to cushion the surprises later on? I think the theory has a problem of motive.
If we lead on renewable energy, will the developing world follow?
The headline’s a cheat: I don’t know. But I had a very weird conversation recently with someone very in-the-know who first said, on the one hand, that Vietnam’s senior leadership is desperately looking for new energy sources, is horrified by the environmental consequences of Chinese coal, and is thus very likely to turn to renewables, such as wind, which has huge potential off Vietnam’s long coastline. And then, about half an hour later, started saying that because of the shortsightedness and corruption of the middle level of management in Vietnam’s government, that efforts to move towards renewables would probably lead nowhere, and the country would end up throwing away its potential.
In sum, I came away feeling I knew more than I did before, but haven’t actually advanced any further towards a yes-or-no answer to the question.