Whistleblower Claims IEA Is Downplaying Peak Oil

Yesterday the Guardian ran a story based on two anonymous sources inside the International Energy Agency who claimed that the agency had distorted key figures on oil reserves. "The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the [IEA] 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." Today the IEA released its annual energy outlook and rejected the whistleblowers' charges. The Guardian has an editorial claiming that the economic establishment is too fearful to come clean on the reality of oil suppplies, and makes an analogy with the (marginalized, demonized) economists who warned of a coming economic collapse in 2007.

Comments

If True, Fascinatingly Bizarre Logic

[eldavojohn]

Reality A: No withheld data. Data is disseminated with some initial shock that by 20xx we will have oil shortages. People get a chance to plan accordingly. Private business gets a chance to cash in on better alternatives and more efficient products marketed to the consumer. California starts to look a little less crazy. Gasoline and fuel slowly becomes more expensive over the years as production slows. People adjust.

Reality B: It's 20xx, suddenly there's no oil. Mass panic. People flip out. People die. Fuel shortages lead to water/food/heating shortages lead to war. Private industry doesn't have a chance to adjust. People aren't prepared to buy a new vehicle on the spot. Californians ride the nearest comet to Heaven's Gate. Crime increases, lawlessness arises, civilization breaks down, I'm forced into a Thunderdome with Cowboy Neal for my right to live.

If the IEA is capable of any logic at all, they are not cooking the books or withholding data. What's the motive of retaining data or fixing charts?

Re:If True, Fascinatingly Bizarre Logic

[oldspewey]

Oil producers have no motivation to lie about oil reserves.

Oil producers have ample motivation to lie about oil reserves. Who has more geopolitical and economic clout:
a) A country with 50 billion barrels in proven reserves, who publicly state they have 50 billion barrels in proven reserves, or
b) A country with 50 billion barrels in proven reserves, who publicly state they have 125 billion barrels in proven reserves?

Who is better able to attract foreign investment in port facilities or refineries? Who has more influence over the large oil-consuming nations?

Re:If True, Fascinatingly Bizarre Logic

[cfulmer]

Both your setups (and, from what I've seen, everybody else's) miss a fundamental fact: There's no on/off oil spigot. It's a gradual process. If there really isn't much oil left, then oil will slowly become more and more expensive as the remaining oil becomes harder and harder to extract. We will never truly run out of it -- it will just get so expensive that it will be used for only a few things. Along the way, as the price goes up, alternatives will develop. People will switch to more fuel-efficient cars, perhaps plug-in hybrids, substituting nuclear and hydro energy for oil energy. Similar innovations will happen through every place that oil is used today. We have nuclear-powered aircraft carriers, why not nuclear-powered super cargo ships? You will see a slew of new battery technologies as companies realize that there's a lot of money to be made in replacing oil. In fact, the more expensive oil gets, the more alternatives become viable. The only real shortage would happen if some government put a price cap on oil or gasoline, perhaps saying "You cannot sell gas for more than $5 a gallon" at a time when market forces would set the price at $10. In that case, there would be shortages. Otherwise, there would just be a bunch of people refraining from buying oil because the prices are too high.

Re:If True, Fascinatingly Bizarre Logic

[orzetto]

You must be new here to OPEC. Let me be your guide.

OPEC exists to maximise the profits of its member countries. To avoid countries from competing against each other and thus lowering the price, there are production quotas.

Quotas are determined for each country based on its reserves.

Reserves are, however, only a rough estimation, because no one can go kilometres underground and survey the oil fields. They only have a few holes, pressure vs. flow data, composition and little more.

As a result, a geologist from Whatsamatterstan is asked from his minister: how much oil reserves do we have? If you say X, we make Y. If you say 2*X, we make 2*Y, and I will be happier. If you say X/2, I will hire another geologist.

So, as a result, reserve estimates within OPEC have a strong incentive to be exaggerated. In order to maximise profits, a country has to put a straight face until oil is really not flowing any more: if they let out the news that they cheated about reserves, they cannot sell oil at the same rate any more, and (not sure about OPEC by-laws) may face fines. So they will always deny any exaggeration in estimates until the bitter end.

Saudi Arabia, in particular, has an enormous incentive to lie about their cheap oil: they have a leadership position in OPEC because they have the largest reservoirs and the cheapest oil (used to be $2/barrel at production), which means they can keep everybody else who may disobey them in line by flooding the market, thereby sinking price, thereby hitting their profits. If they were to hit peak oil, that country would suddenly be powerless, useless to the US as a strategic ally, and will lose its position of prominence (most likely) to Iran, which you may guess will start a long domino effect.

Re:If True, Fascinatingly Bizarre Logic

[CensorshipDonkey]

Some of us do not want the companies to do whatever they want with their own money, it is true! They cannot mine everywhere, because we prefer unmined land, and they cannot pollute as much as they want, because we prefer unpolluted land! So, how do we decide how much companies get to exploit the world for their own profit? We get together and vote. It turns out the current majority of our population does NOT WANT more CO2 producing fossil fuel extracted, while creating a non-trivial mess in the process. The free market is a means to an end, and that end is a good life with personal liberty etc. The free market itself is not the end.

Re:Bah!

[Gerzel]

It doesn't matter if there is more or not. The total determines the price. THe more simply means we'll be the last to fall, assuming an equal rate of use. However we use a lot more oil than other similar countries so that oil is a mitigating factor and if you think it's going to be sold at a discount to those in the US w/o some sort of government intervention then you are going to be in for a rude surprise.

Re:Not worried

[bdeclerc]

Maybe you don't realise, but the price of "gas" is factored in in pretty much everything else you buy... That video game, how do you reckon it's transported to the store? That dinner, how do you think its ingredients are harvested, and possible, with what it is cooked?

Price of oil/gas rises --> price of all manufactured goods & services rises --> cost of living rises... This effect is far, far bigger than the "very small part of your recurring bills" that is you directly buying gas...

From Peak to Asymptote

[Geoffrey.landis]

Once we have reached the "peak", how long will it take to actually "run out"?

Forever.

We don't "run out." What happens is that the production decreases, and the price increases, so production heads asymptotically toward (but never reaching) zero production rate. As the price rises it becomes economically feasible to extract harder and harder to recover oil, and production never stops.