Fatih Birol, head of the IEA’s most important energy divisions, has finally announced global peak oil. Policy advisors and politicians and polity take note: here it comes! (And I think this is probably optimistic, and that we are probably there now, but at least it is now official!)
GLOBAL oil production is likely to peak in about 10 years, a leading energy economist says.
“When the oil price gets too high alternative energy gets a lot more viable.”
The warning from the chief economist at the International Energy Agency (IEA) Fatih Birol comes as figures show Australia’s crude production has fallen by 24.92 per cent in the past five years.
Domestic importation of oil is also predicted by the Australian Bureau of Agriculture and Resource Economics to fall to 24,665 megalitres in 2008-09.
Dr Birol has warned a rise in oil demand and the subsequent price hike could wreck a potential recovery in the worldwide economy.
“One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us,” Dr Birol told British newspaper The Independent.
“The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously,” he said.
CommSec economist Savanth Sebastian played down some of Dr Birol’s more dire warnings.
“It’s not likely to derail the recovery,” Mr Sebastian said.
“This is really a structural change.”
On the wider front he said Dr Birol was right to warn about supply.
It is “a fair call, it’s what we have been saying all along”.
An assessment of over 800 of the world’s major oil fields has found most of the biggest ones have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated two years ago.
Earlier this year the IEA predicted crude demand would jump between 0.4 per cent and 1.4 per cent annually after 2009, depending on the pace of the economic recovery and mid-term GDP trend growth levels.
The difference is massive for the global oil balance.
The 1.4 per cent prediction would provide 2014 demand of 89 million barrels per day – a gigantic four mb/d above the lower growth case.
Dr Birol also warned that the market power of the very few oil-producing countries that hold substantial reserves of oil – mostly in the Middle East – would increase rapidly as the oil crisis begins to grip after 2010.
“The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future,” he said.
The IEA, the energy monitoring and policy arm of the 30-nation Organisation for Economic Cooperation and Development, said last month that signs of a strong rally in global economic growth and oil demand were fading.
The IEA added however in its latest monthly report that there could be a dramatic turnaround for demand next year.
For Mr Sebastian, all this worry is not going to go on for too long.
“Demand will continue to grow,” he said.