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

On the plus side!

[fuzzyfuzzyfungus]

We might manage to find some more oil if we all stick our heads far enough into the sand, that is basically where it lives...

Re:On the plus side!

[elrous0]

If my sources are correct, all we have to do is kill a bunch of dinosaurs then wait.

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

[Anonymous Coward]

People who bought oil future loose their shirts.

Why? Did they get too hot?

Re:If True, Fascinatingly Bizarre Logic

[orzetto]

You are thinking only in economic terms. At some point there is an absolute economic limit when you are using as much energy to extract and process the oil as the energy you actually get out of it.

So, there are reserves that are "unattainable" because it is not energetically sane to extract, and they will never be economically feasible no matter the price.

Keep in mind that already now extracting only 50% of the oil of a reservoir is not considered that bad (and that's secondary recovery already, when you flush with water to get more oil out).

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

[cheesybagel]

Oil shale is not petroleum. It can be processed into fuel, but so can coal and natural gas. Shale is not processed more because it is expensive and environmentally harmful to to convert. Even tar sands are cheaper.

Here is what you probably don't know: Ronald Reagan stopped funding research on coal to liquids and extraction from oil shale by abolishing the Synthetic Liquid Fuels Program in the 80s.

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

[Vintermann]

> So, there are reserves that are "unattainable" because it is not energetically sane to extract, and they will never be economically feasible no matter the price.

As one witty peak oiler explained it: If I want an apple, I may pay a dollar for it. If I really want and apple, I might pay a thousand dollars for it. But no matter how much I like apples, there's one price I will never pay for one, and that is twoapples.

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:If True, Fascinatingly Bizarre Logic

[gestalt_n_pepper]

Yes, there's plenty of oil, and there always will be, because we'll end up leaving most of it in the ground.

Those oil shales you mentioned, and the Bakken oil formations a bit farther north, have more oil in them than all of Saudi Arabia, and might as well be on Alpha Centauri, for all the good it'll ever do us.

The problem is this. Regardless of what available technology you choose, the majority of this stuff is neither energy positive, nor economical to produce. It's in *shale.* You know, rock. It's not some nice big pool of spongy liquid you can put a straw in like the Ghawar fields in Saudi. You have to dig the rock, grind the rock, and *heat* the rock to get the oil out. Depending on how much oil is in the rock and how finely you ground it, you may, or more often not, get as much oil energy out of the rock as you put into it.

Which is why all those new finds so breathlessly reported by those with journalism degrees don't mean squat.

A deep water find that only yields sulfur-laden, heavy crude (i.e. tar) in multiple scattered reservoirs is NOT equivalent to some nice little civilized shallow well in porous rock that yields light sweet crude. The first is cheap to get, cheap to process, cheap to ship and it all can be done quickly. The latter is NOTHING like that. The latter is a decade from well to the tank in your car, if then.

Bottom line? Cheap oil is a thing of the past. Our expanding economy depended on an ever expanding supply of cheap, portable energy. That goes away when oil goes away. We will transition, no doubt, but a few, maybe more than a few will starve to death before we do and more than a few governments may fall.

Cheers!

Re:If True, Fascinatingly Bizarre Logic

[Rei]

I like to call it the "Reverse Cassandra Effect" (stole the term from Simon). People *love* to listen to doomsayers, far more than people who tell you that things are going to be fine. The doomsayer can have the flimsiest of evidence and the dissenter a solid case, but the very notion of doom itself seems to make the audience more receptive to what they have to say.

A classic example is the Simon-Ehrlich Wager. Julian Simon, a libertarian-leaning business professor, bet Paul Ehrlich, a biologist who had published a series of books about imminent resource scarcity in the 1970s, that the inflation-adjusted price of five commodity metals -- of Ehrlich's choosing -- would average dropping over the course of the 1990s. Simon won -- bigtime. All five metals dropped in price, some by huge amounts. The aftermath? Despite Ehrlich's loss and his similar forecasts of huge famines, resource wars, etc all failing to materialize, Simon remained in relative obscurity, while Ehrlich received a MacArthur Foundation Genius Award for "greater public understanding of environmental problems" in his doom-preaching books.

And when I say this, note that I in general am *not* fond of libertarian ideals, and consider myself an environmentalist. But these doomer notions of secret imminent scarcity are just plain hokum.

Re:If True, Fascinatingly Bizarre Logic

[IamTheRealMike]

Indeed. And in fact Kuwait has already been caught lying about its reserves red handed. Anyone who runs the numbers on Saudi Arabia also finds they are highly suspicious. It's almost certain in fact that OPEC members routinely lie about the size of their reserves and this is acknowledged by the IEA as well.

Not worried

[hatemonger]

Maybe I'm the exception, but gas is a very small part of my recurring bills. If gas prices double or triple, maybe I'll skip a new video game or dinner out every month. Whoop-de-do. And the price of shipping goods will increase. So I'll pay $0.79 instead of $0.59 for a potato. I'm just not quaking in my boots. The biggest overlooked fact of peak oil is that it will be a gradual decline as more oil recovery methods become economically feasible. So over the rest of my life, I suspect there will eventually be a cheaper mode of transportation than gas-powered cars. But for now, I'll stick with the convenience of 400 miles/fill-up, gas stations everywhere, and transportation costs (including car payment) below 15% of my income.

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...

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.

Missing the point

[fiannaFailMan]

America, with 5% of the world's population, consumes about 25% of its resources. Reason? Single Use Zoning. The silly settlement pattern that puts housing neatly in one area, shopping in another, office space in another, and industry in another, and then forces people to drive between all these areas throughout the course of the day. Okay, it makes sense to zone off industry in certain cases where noise and pollution is an issue. But making it illegal to open a corner store in a residential area? No wonder so many journeys are made by car in the USA, bus journeys in that kind of sprawl take forever and mass transit gets a bad reputation (deservedly so). Induced traffic is another symptom of this problem - roads get wider, developers develop farther out to allow people to take advantage of the faster commute and lower property prices, roads get filled with cars belonging to these new commuters, and we're back to square one again with people demanding that the road gets widened even more!

As long as American settlement patterns are so screwed up, the problem will exist even if we aren't in a state of world peak oil. The problem is a hopeless addiction to petroleum that no magic wand nuclear power solution (mentioned by someone above) will be able to fix.

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.