International Energy Agency economist Fatih Birol’s latest assessment of the petroleum situation has been published and it is sobering:
Warning: Oil supplies are running out fast
Catastrophic shortfalls threaten economic recovery, says world’s top energy economist
Monday, 3 August 2009
The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.
Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.
In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.
But the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an “oil crunch” within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said.
In a stark warning to Britain and the other Western powers, Dr Birol said 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.
“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, and we have to prepare ourselves for that day,” Dr Birol said. “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.
While this is no news to the five or six people who read this blog, it is a sharp change in direction for the establishment that conforts itself with energy shortages safely twenty or so years into the future.
This puts the oil issue on a similar footing as climate change and certainly a factor in the ongoing Global Financial Crisis.
Outside the reach of mainstream media, there is an ominous sense of foreboding, even dread. At a certain level, there is the drivelous ejaculations of the ‘Green Shoots’ crowd who manipulate the various markets with one hand and congratulate themselves on the outcome of this manipulation with the other.
What is revealed is the levels of larceny that have clearly existed for decades. These machinations in the credit, stock- jobbing, and gold markets haven’t just appeared, but are continued. Without the cover or ordinary business in these markets – the retail and even professional traders have vanished, are ruined or have been taken out of their normal positions – the manipulations are now in plain sight.
What does all this mean?
The charade will come to an end soon enough. The ‘Ides of August’ are night and soon comes October, the month when the stock market faces fatal dangers. Outside the reach of the manipulators, the rest of the economy lies impaled upon + $45 oil. At $70 it is poised to push higher, Mr. Birol’s warning will not be scrutinized to the ‘ten year’ lie, it will be acted upon. As mentioned here before, if prices can rise past $78 – 80, the race to $147 will be on … and the markets will crash all over again.