Key oil figures were distorted by US pressure, says whistleblower
Exclusive: Watchdog's estimates of reserves inflated says top official
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Terry Macalister
guardian.co.uk, Monday 9 November 2009 21.30 GMT
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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 to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies.
'There's suspicion the IEA has been influenced by the US' Link to this audio
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 83m barrels a day to 105m 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.
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.
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 tomorrow.
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.
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."
Aaaaaaaand their response:
Energy body rejects whistleblower allegations of oil cover up
By Hilary Whiteman, CNN
November 10, 2009 -- Updated 1805 GMT (0205 HKT)
The International Energy Agency warns that oil and gas supplies are running out -- but not as quickly as some expect.
STORY HIGHLIGHTS
IEA rejects reported whistleblower allegations body has exaggerated oil supplies
Senior IEA source told newspaper that world is closer to running out of oil than official estimates suggest
IEA's 2009 World Energy Outlook outlines two scenarios for future world oil use
Urges world leaders to agree a global treaty to reduce reliance on fossil fuels
London, England (CNN) -- The International Energy Agency has rejected reported allegations from a whistleblower that world oil reserves have been exaggerated to avoid panic buying in the oil market.
A senior source within the IEA is reported to have told The Guardian newspaper that many within the agency believe the body's prediction for oil supplies "is much higher than can be justified."
In its annual outlook released on Tuesday, the IEA repeated its prediction that oil supplies would rise to 105 million barrels by 2030 under current government policy.
"We're the ones that are out there warning that the oil and gas is running out in the most authoritative manner. But we don't see it happening as quickly as some of the peak oil theorists," Richard Jones, deputy executive director of the IEA, told CNN.
"Generally, we're viewed as more pessimistic than we should be by the (oil) industry," he added.
The whistleblower, who reportedly refused to be identified for fear of reprisals, told the newspaper that: "Many inside the organization believe that maintaining oil supplies at even 90 million 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."
Another second senior source also reportedly told the newspaper that within the energy body, it was "imperative not to anger the Americans" who were said to play an influential role in encouraging the body to underplay potential supply shortfalls.
"I don't see why that would be in the U.S. interest. I don't see the logical chain of that allegation," Jones told CNN.
The IEA source is also reported to have said: "We have already entered the 'peak oil' zone. I think that the situation is really bad."
Peak oil theorists argue that the world is rapidly running out of oil. A report released by The UK Industry Taskforce on Peak Oil and Energy Security warned in 2008 that a "peak in cheap, easily available oil production" was likely by 2013.
Jeremy Leggett, CEO of Solar Century and a member of the taskforce, told CNN that the allegations from within the IEA were particularly worrying, but not surprising.
"I increasingly think there are parallels between [the oil industry] and what we now know of the banking culture," Leggett told CNN. "It's the systematic, cultural burial of risk. Investment bankers did it with complex derivatives. And I very firmly believe that the oil and gas industry culturally does the same thing with the depletion of reserves."
"The bankers hit the buffers -- they buried the risk until it exploded in their faces. It's going to be the same with the oil industry," he added.
The IEA's 2009 World Energy Outlook is explicit in its warnings about the impact of a "business as usual" approach to energy over the next 20 years.
"The scale and the breath of the energy challenge is enormous -- far greater than many people realize. But it can and must be met," the report said.
It presents the results of two scenarios: The "Reference Scenario" assumes government policy remains the same, while the "450 Scenario" projects what may happen if governments take action on climate change.
The 450 refers to the long-term concentration of 450 parts per million of CO2-equivalent needed to limit to 50 percent the probability of a global average temperature rise of two degrees Celsius.
Under the "Reference Scenario" -- where global temperatures could rise by up to six degrees Celsius -- demand for fuel is predicted to rise 40 percent on 2007 levels between now and 2030.
Non-OECD countries led by China and India are behind more than 90 percent of predicted rise, along with the Middle East.
Despite the push towards renewable energy, the IEA predicts three quarters of the increased demand would be for fossil fuels.
Demand for oil is expected to rise from 85 million barrels per day to 105 million barrels per day by 2030. While demand for coal would jump by 53 percent and natural gas by 42 percent from 2007 to 2030.
The report assumes that gas, coal and oil prices would rise along with demand.
Crude oil would be expected to cost as much as $115 per barrel by 2030. This year, the IEA estimates oil prices will average around $60 a barrel. Crude is currently trading around $80 a barrel after a spike earlier this week.
The IEA says the worst case scenarios can be avoided if world leaders agree a global climate change treaty at next month's U.N. climate conference in Copenhagen (COP15).
Bring your voice to world leaders at COP15 -- Be part of the CNN-YouTube debate
Limiting the temperature rise to two degrees Celsius, the report says, would require a "low-carbon energy revolution."
It acknowledges the challenge is "formidable," but says the reductions in energy-related CO2 emissions can be achieved through emissions caps, a move to low or zero carbon energy sources and new technologies including carbon capture and storage.
The IEA concludes that trillions of dollars in additional investment is needed to avoid the worst case scenario of climate change.
"In the climate friendly scenario, we see the demand for investment at around $10.5 trillion higher, but that's spread well over 20 years so it's a manageable amount," Jones said.
World leaders are scheduled to meet in Copenhagen from December 7 to agree a new global climate treaty to replace the Kyoto Protocol which is due to expire at the end of 2012.
