[Peak Oil] IEA, we hit Peak in 2006

[Chris OFarrell]

http://www.abc.net.au/news/stories/2011 ... 202209.htm

One major indicator of inflation is the price of petrol and the latest information from the International Energy Agency (IEA) shows it will only get more expensive.

Oil is deeply embedded in the economy, with the cost reflected not only at the petrol bowser but in food and clothing products.

The IEA is an independent, multi-government agency formed out of the wake of the 1973 oil crisis. It forecasts oil production, monitors the international oil market and other energy sectors.

Only five years ago it confidently stated that oil production was set to rise to 120 million barrels a day by 2030.

But IEA chief economist Fatih Birol says the world's crude oil production peaked in 2006.

He says oil prices are likely to rise 30 per cent over the next three years.

"The existing fields are declining so sharply that in order to stay where we are in terms of production levels in the next 25 years, we have to find and develop four new Saudi Arabias," he said.

"It is a huge, huge challenge that we continue to underline."

Dr Birol says although peak crude oil production is already behind us, liquid natural gases may provide a viable alternative.

But he says one of the conclusions the IEA has come to is that the age of cheap oil is over. At the height of the global financial crisis in 2008, oil spiked to $148 a barrel.

Dr Birol says the impact of both a financial crisis in Europe and global instability in oil-rich regions means crude oil will only get more expensive.

"The amount of increase in the oil input bill in Europe is equal to the government budget deficit of Greece plus Portugal put together," he said.

"It is only the increase value of $90. If it increases further ... we believe [it] will increase at least 20, 30 per cent higher in the next few years to come and this would mean additional pressure on the financing of many governments who are the oil importers."

Dr Birol says the oil reserves might be there but the access is not.

He also says it could be in the best interest of producers if crude oil is not always flooding the market.

"The producers, intentionally or unintentionally, may not bring the oil under the reserves to the markets," he said.

"For some producers, it is better that oil doesn't come to market so they would like to see perhaps higher prices as a result of tightness in the markets."

The IEA says governments around the world need to rethink their reliance on oil.


Hear more about the oil crunch on Catalyst's energy edition tonight on ABC 1 at 8:00pm.

So, back to preparing the survival shelter now?

[Sea Skimmer]

If we actually see shortages of oil, then that doesn’t just mean oil prices skyrocket. It means the several trillion dollar yearly value of the oil market at these prices starts going into other sources of energy at last. We could have three or four very painful years, but after that other means do exist to make energy on a mass scale. Oil is just easy, and until relatively recently it was so cheap one could hardly justify not using it.

I’m worry more about a general war in the Mid East, or well, anything involving Saudi at the moment making that fear physical shortage of oil an instantaneous reality. It also does not help that a gas pipeline was just blown up in Egypt and frankly at any time someone could block the Suez Canal.

[K. A. Pital]

Building lots of nuclear plants is not a matter of two or four years, and the Fukushima debacle makes necessary measures less likely than before. This is unfortunate.

[HarrionGreyjoy]

Neither is running entirely out, though. There are quite a lot of currently cost-prohibitive deposits of oil (and gas, and coal) that will suddenly look a lot less prohibitive when prices continue to rise; meanwhile, the cost of alternative energy sources will probably stay pretty stable or fall.

[Simon_Jester]

One side of the problem comes down to the match-up between the lead time for the projects we need in order to deal with the shrinking oil supply and the rate at which the oil supply shrinks. This is the side the developed nations will have to deal with the most, and it's... not entirely unmanageable.

The other side, one more intractable, is the question of what will happen to our economy, locally and globally, when the cost of energy (especially cheap energy for transportation), and of petrochemicals, increases drastically. That's harder to solve without major dislocations, on a scale that market economies aren't good at managing and that all too many politicians are afraid to address. It's also potentially disastrous for the Third World, where economies are more marginal, populations are higher, and thus cheap energy becomes a survival necessity rather than a luxury people can afford just by buying fewer iPods.

[PainRack]

Isn't the real problem that cheap oil has been fundamental to modern day lifestyles and economies?

Even if a new replacement does come in, the era of cheap oil which drove globalisation, which gave us subsidised food, medicines, even suburbans and etc, all that is gone.

[bobalot]

Isn't the real problem that cheap oil has been fundamental to modern day lifestyles and economies?

Even if a new replacement does come in, the era of cheap oil which drove globalisation, which gave us subsidised food, medicines, even suburbans and etc, all that is gone.

That's correct. It doesn't look like that civilization will end (what some peak oilers imply) but it does look like we will be paying higher prices for goods and energy. The layout of car centric cities will have to change.

[Big Phil]

I'm going to agree with those who say that if we actually did hit peak five years ago, it might be a good thing. It'll force the adoption of sustainable sources of energy, and might force conservatives to accept that Saudi Arabian oil won't be there forever and it's time for us to secure our future.

Also, I'd be happy to give a mailing address to which any END OF THE WORLD nutcases can send me their savings (which they won't need since we're all going to die soon anyway).

[Paradoxical]

I'm going to agree with those who say that if we actually did hit peak five years ago, it might be a good thing. It'll force the adoption of sustainable sources of energy, and might force conservatives to accept that Saudi Arabian oil won't be there forever and it's time for us to secure our future.

Actually the far sillier belief among conservatives online is that if we lifted all the environmental protections for drilling then we'd be able to meet demand domestically and no longer rely on foreign oil, somehow.

Even the rosiest predictions had us hitting peak production within 20 years or so. So it's unsurprising to me if we're already at that stage or near it.

I just hope living in an urban area doesn't become prohibitively expensive in response to shrinking commuters.

[J]

Neither is running entirely out, though. There are quite a lot of currently cost-prohibitive deposits of oil (and gas, and coal) that will suddenly look a lot less prohibitive when prices continue to rise; meanwhile, the cost of alternative energy sources will probably stay pretty stable or fall.

Well...not really, since oil is such a huge part of our modern day live we end up with what's been termed the law of receding horizons; when oil prices go up the costs feed back into everything and drives up the break-even costs of alternatives and to be developed oil deposits.

Let's say we have an oil sands project where the break-even point is $70 a barrel and oil prices are currently at $50/barrel, logically it won't be developed until oil prices break $70. So let's say a few years later oil is now selling for $80/barrel, time to start digging in the oil sands to claim that nice $10/barrel profit right? Well, probably not. That $30/barrel increase in the price of oil has driven up the construction & operating costs of the project and the break-even cost is now $85 a barrel. Hmmm...that's not good, guess we'll have to let it sit till oil breaks $90.

And the same is true of many of the alternatives, higher oil prices will feed back in and result in cost increases, how much depends on the alternative in question, some are more sensitive than others.

[PainRack]

That's correct. It doesn't look like that civilization will end (what some peak oilers imply) but it does look like we will be paying higher prices for goods and energy. The layout of car centric cities will have to change.

You're thinking too small.
The Third world? The marginalised communities out there? That relies on cheap food(produced with cheap energy), relies on cheap distribution of goods and services that relies on cheap transportation,realignment of markets and services that leaves many of these areas abandoned and the resulting population shift as people concentrate into cities or other regions that may not be able to accept a population shift....


And when you remember the food riots in Egypt, caused by rising food costs, or how racial riots and essentially genocide in Indonesia was prompted by the huge disruption in the economy and distributive networks after the Asian Finanicial Crisis and its subsequent effects........