Oil Reserve Estimates Inflated?

The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency 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  — which is used by many 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 83 million barrels a day to 105 million 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.

Peak increasingly accepted

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 120 million barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105 million last year,” said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. “The 120 million 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 90 to 95 million 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.

Importance of IEA figures

The IEA acknowledges the importance of its own figures, boasting on its website: “The IEA governments and industry from all across the globe have come to rely on the World Energy Outlook to provide a consistent basis on which they can formulate policies and design business plans.” The British government, among others, always uses the IEA statistics rather than any of its own to argue that there is little threat to long-term oil supplies.

The IEA said tonight that peak oil critics had often wrongly questioned the accuracy of its figures. A spokesman said it was unable to comment ahead of the 2009 report being released.

John Hemming, the MP who chairs the all-party parliamentary group on peak oil and gas, said the revelations confirmed his suspicions that the IEA underplayed how quickly the world was running out and this had profound implications for British government energy policy.

He said he had also been contacted by some IEA officials unhappy with its lack of independent scepticism over predictions. “Reliance on IEA reports has been used to justify claims that oil and gas supplies will not peak before 2030. It is clear now that this will not be the case and the IEA figures cannot be relied on,” said Hemming.

“This all gives an importance to the Copenhagen [climate change] talks and an urgent need for the UK to move faster towards a more sustainable [lower carbon] economy if it is to avoid severe economic dislocation,” he added.

Projection questions

The IEA was established in 1974 after the oil crisis in an attempt to try to safeguard energy supplies to the west. The World Energy Outlook is produced annually under the control of the IEA’s chief economist, Fatih Birol, who has defended the projections from earlier outside attack. Peak oil critics have often questioned the IEA figures.

But now IEA sources who have contacted the Guardian say that Birol has increasingly been facing questions about the figures inside the organisation. Matt Simmons, a respected oil industry expert, has long questioned the decline rates and oil statistics provided by Saudi Arabia on its own fields. He has raised questions about whether peak oil is much closer than many have accepted.

A report by the UK Energy Research Centre (UKERC) last month said worldwide production of conventionally extracted oil could “peak” and go into terminal decline before 2020 — but that the government was not facing up to the risk. Steve Sorrell, chief author of the report, said forecasts suggesting oil production will not peak before 2030 were “at best optimistic and at worst implausible”.

But as far back as 2004 there have been people making similar warnings. Colin Campbell, a former executive with Total of France told a conference: “If the real [oil reserve] figures were to come out there would be panic on the stock markets … in the end that would suit no one.

•••

This article was originally published on guardian.co.ukon Monday 9 November 2009.

Copyright The Guardian. All rights reserved.

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  • Isagenix

    The world is much closer to running out of oil is true. We need save oil. Isagenix

    • http://google.com Zapp

      That statement is so true

  • Oil

    We need to find other solutions to the wolds shortage of oil

  • http://www.hunterrecruitment.co.za/petrochemical.htm oil rig jobs

    This argument never ceases to amaze me. Predictions are just that. Whether we are 5, 10 or 50 years away from oil running out, we will have prior warning by way of increasing prices and info from the guys actually doing the drilling. It’s not just going to happen one day that the oil’s all gone and we have no choices. Alternatives are available but they are expensive and extracting oil from the earth is cheap in comparison. No company is going to continue extracting oil if it’s not viable.

    • BrendanBarrett

      You make it sound so easy switching from one fuel source to another. However, the Hirsch Report indicates that we need at least 20 years to transition from oil to something else. So the more advanced notice we have, the better. The problem is that those directly involved in the oil industry are the one least likely to share information on when they consider it will run out. No business would ever do that because investment would fall and so would share prices. .

      • http://www.hunterrecruitment.co.za/blog oil rig jobs

        I certainly don’t think that it will be easy to move from one energy source to another but the incentive will only come when the price of extracting and refining oil becomes greater than the alternatives. We are already aware of potential scarcity of the oil resources so alternatives are available already and new potentials are being investigated every day. But unless the government steps in and makes it viable to produce alternatives via subsidies we will not see much incentive to move away from oil in the foreseeable future.

        • BrendanBarrett

          I agree with you completely on the issue of subsidies, which in part are the result of powerful lobbying. But I think it was Fatih Birol of the International Energy Agency that said we should say goodbye to oil, before it says goodbye to us. That was back on 2008 and since then he has continued to warn of the end of cheap oil, and that is from the chief economist of a rather conservative organization like the IEA. So there must be an underlying problem with our reserves and the relative cost of extracting future oil, and it is something governments should be paying more attention to. The IEA project the peaking of oil production by 2020, that is not really far from now. While as you point out projections are projections, they can be too pessimistic or too optimistic. But what is worrying me is that they are now starting to converge around the same dates.