From The Independent, today:
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.
..."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.
...The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong.
"If we see a tightness of the markets, people in the street will see it in terms of higher prices, much higher than we see now. It will have an impact on the economy, definitely, especially if we see this tightness in the markets in the next few years," Dr Birol said.
Dr. Birol makes it sound as if higher prices are a bad thing. Quite the contrary: low oil prices in the face of scarcity would be bad. High prices are needed to give us the incentive to "prepare ourselves." That's why peak oil doesn't matter. The peak means maximum production and maximum production means low prices. Low prices mean do nothing. High prices mean do something.
In my opinion, prices are the only (and simplest) mechanism powerful enough to provide the incentive for the widespread changes in opinion needed for industrial change of this magnitude. Unfortunately, some might interpret that as a call for governmental manipulation of prices. Please don't interpret it that way. That would be the wrong interpretation of what I'm saying and I might cry.
My position is simple: I'm confident that the market will take care of the prices all on it's own. When prices rise, people will take notice. But I'm just an economist...what do I know?
*For those under the age of 25, a record is one of those big round black plastic discs (kind of like a big CD**) in that box in your parents' attic. They have a bunch of grooves that when combined with a needle and a speaker produce sound. When the record gets scratched, the needle skips and the record plays the same snippet of a song over and over. Hence the phrase "broken record" for someone who repeats himself often. Life lesson over.
**For those under the age of 18, a CD is one of those small shiny discs that your parents used to put into a "CD player (think big ipod)" to play music. More commonly now, a CD is one of those things in that stack of 250 small shiny discs that I your parents have sitting next to my their computer waiting for my kids you to download them onto my their itunes account so all the music my kids you so rudely refer to as "oldies" (music from the 80's and 90's) can be uploaded onto my your parents' new ipod touch-which I'm sure will be outdated in a year forcing me your parents to figure out some newer G**D*** technology.
