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.
"The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future," he said.
There is now a real risk of a crunch in the oil supply after next year when demand picks up because not enough is being done to build up new supplies of oil to compensate for the rapid decline in existing fields.
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.
"It will be especially important because the global economy will still be very fragile, very vulnerable. Many people think there will be a recovery in a few years' time but it will be a slow recovery and a fragile recovery and we will have the risk that the recovery will be strangled with higher oil prices," he told The Independent.
In its first-ever assessment of the world's major oil fields, the IEA concluded that the global energy system was at a crossroads and that consumption of oil was "patently unsustainable", with expected demand far outstripping supply.
Oil production has already peaked in non-Opec countries and the era of cheap oil has come to an end, it warned.
In most fields, oil production has now peaked, which means that other sources of supply have to be found to meet existing demand.
Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030, Dr Birol said.
"It's a big challenge in terms of the geology, in terms of the investment and in terms of the geopolitics. So this is a big risk and it's mainly because of the rates of the declining oil fields," he said.
"Many governments now are more and more aware that at least the day of cheap and easy oil is over... [however] I'm not very optimistic about governments being aware of the difficulties we may face in the oil supply," he said.
Environmentalists fear that as supplies of conventional oil run out, governments will be forced to exploit even dirtier alternatives, such as the massive reserves of tar sands in Alberta, Canada, which would be immensely damaging to the environment because of the amount of energy needed to recover a barrel of tar-sand oil compared to the energy needed to collect the same amount of crude oil.
"Just because oil is running out faster than we have collectively assumed, does not mean the pressure is off on climate change," said Jeremy Leggett, a former oil-industry consultant and now a green entrepreneur with Solar Century.
"Shell and others want to turn to tar, and extract oil from coal. But these are very carbon-intensive processes, and will deepen the climate problem," Dr Leggett said.
"What we need to do is accelerate the mobilisation of renewables, energy efficiency and alternative transport.
"We have to do this for global warming reasons anyway, but the imminent energy crisis redoubles the imperative," he said.

http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html

This is a big topic of debate on VNN. Honestly, I don't know what to think at this point. I thought maybe it was going to happen last year when oil was trading for $150 a barrel, but then it came right back down. I don't believe oil is limitless, but I do believe the government's capacity to restrict our access to it is. T.J.B.

Peak Oil doom is back in the news!

http://blogs.wsj.com/environmentalcapital/2009/08/03/oil-prices-past-70-on-economic-optimism-just-wait-for-peak-oil/

Oil Prices: Past $70 on Economic Optimism; Just Wait for ‘Peak Oil’

They say that second marriages represent the triumph of hope over experience. The same, it seems, is true of the oil market.

Crude oil futures surged past $71 a barrel, and a one-month high, on the back of some encouraging data about U.S. and Chinese manufacturing. That is, U.S. manufacturing, while still contracting, doesn’t look as awful as it did just a few weeks ago, while China’s factories seem to genuinely be hitting cruising speed.

As a result, crude futures rose almost 3% to $71.46 in midday trading in New York.

The problem is, there’s little clear sign that a wider economic recovery is directly translating into more demand for crude oil. More importantly, even if demand is poised for a recovery, the huge overhang of crude-oil supplies all around the world should act as a cushion against $70 oil in the short term. Inventories in the U.S., the world’s biggest oil consumer, are growing—not shrinking.

There are even more reasons to be bearish on the supply side, in the near term at least. OPEC’s much-vaunted discipline this spring appears to have broken down almost completely, meaning the world’s biggest oil producers are pumping more oil precisely when the global economy is unbottoning its pants and pushing back from the table, sated.

Of course, the irony is that all the optimism about the economic recovery could end up undoing the economic recovery. That is, oil at $70 or higher does not help major economies get back on their feet.

But simple geology, rather than market machinations, might do the same: Fatih Birol, chief economist of the International Energy Agency, told the Independent today that “peak oil” is a lot closer than most governments realize. Crunch time, he said, is now set for 2020.

http://www.independent.co.uk/opinion/commentators/jeremy-leggett-another-crunch-is-coming-ndash-but-will-the-world-act-1766551.html

Jeremy Leggett: Another crunch is coming – but will the world act?

There is one major similarity between the energy crisis and the financial crisis and one main difference. These two things tell us a lot about the role of cultures in how our modern version of capitalism plays out.

The similarity is that we are dealing with two massive global industries who have their asset assessment systemically, and roundly, wrong. The difference is that few people and organisations warned about the credit crunch as it approached, where as with the oil crunch, a host of people – many in and around the oil industry – are shouting a warning, and so to are a few good organisations concerned companies span British industry.

As for the international energy agency, it is as the World Bank was warning about the credit crunch a few years before it hit. In 2007, I convened an industry task-force on peak oil and energy security in the UK. It is chaired by Virgin, and members include Scottish and Southern energy, Arup, Foster + Partners, Stagecoach and my own company, Solarcentury. We released our first report at the London Stock Exchange last November, and our second will be released in November this year.

The first report concluded that peak oil is a grave risk for the global economy. Specifically, what concerns us is the threat in the premature peak in global oil production caused by either or both of a collective overestimation of reserves by the global oil industry, and an inability to deliver enough flow capacity because of underinvestment. The second report will examine, among other things, the impact of the recession on the global prices.

My own view of the state of play is that the recession might have bought us a little time, but has deepened the crisis beyond. The central problem is that the underinvestment in the oil industry today will play out as a tighter crunch in the middle of the next decade. It takes an average of six and a half years from finding an oil field to bringing it onstream and, in the rare case of giant fields, often more than 10 years. Why haven't more people in government, and the oil industry itself, seen this particular crisis coming? Why aren't they acting proactively to soften the blow?

The same question can be asked, with hindsight, of the bonus cultists who gave us the credit crunch, and their institutional fans. Gillian Tett of the Financial Times, a trained anthropologist, describes in her recent book the effort made by the banking elite at "ideological domination" ahead of the financial crash. Elites do this to maintain power, she explains. They decide what is talked about and what is not. There was a major "social silence" around the epidemic growth of derivatives.

This is exactly what I see going on among my old friends in the oil industry when it comes to weighing their assets. And their dysfunctional culture extends right into Whitehall, which is asleep on this issue. Civil servants will barely engage with the UK industry task-force.

One of the few financiers who saw the credit crunch coming said derivatives were financial hydrogen bombs built by 26-year-olds with MBAs. Here is another set of similarities and differences. The oil crunch is an economic hydrogen bomb. But it is being built by men close to retirement. The average age in the oil industry is 49, one of the biggest problems. It will fall to 26-year-olds to clear up their mess. Few of them have ever found an oilfield, much less built a refinery.

Jeremy Leggett, a green energy entrepreneur and writer [www.jeremyleggett.net], worked for more than a decade as an oil industry geology consultant

This is a big topic of debate on VNN. Honestly, I don't know what to think at this point. I thought maybe it was going to happen last year when oil was trading for $150 a barrel, but then it came right back down. I don't believe oil is limitless, but I do believe the government's capacity to restrict our access to it is. T.J.B.

I would have said Wall Street manipulation. That's not to say that outside influence doesn't play a big part (like when Katrina hit) but during relatively stable times prices can be artificially lowered to keep the 'economy' chugging along. For the time being anyway.

Obviously oil is not an infinite resource, anyone who says it is, is nuts. It has to run out sometime even if some governments are protecting certain oil fields from being exploited at the present moment.

Peak oil is a hoax.
Oil is where ever you find it, and it is everywhere.
There is no telling how much there is, until we have found it all.
Back in the thirties and forties, those naughty Nazis, synthesized oil from coal. And there are more than enough coal deposits in north America, alone, to last the entire world, for centuries.
The problem is not shortage of oil, (now, or in the future) it is who and what dictates oil production and supply.

Obviously oil is not an infinite resource, anyone who says it is, is nuts.

Well yes, it is not infinite. No resource is infinite, even sunlight will run out eventually. The question is, will oil run out anytime soon?

The evidence suggests not. Plenty of evidence suggests that oil isn't even a fossil fuel. I don't know for sure, but I lean towards the abiotic theory.

Plenty of money to be made in making people BELIEVE that oil is running out soon, though.

Well, we're going to be dealing with oil shortages soon enough, whether it's a man-made scam or Natures limits. All your dreaming of infinite oil and driving around in 8 cylinders like it's 1957 won't make a dime's worth of difference.

http://theautomaticearth.blogspot.com/2009/06/june-17-2009-40-ways-to-lose-your.html

Deflation is inevitable due to Ponzi dynamics (see From the Top of the Great Pyramid)
The collapse of credit will crash the money supply as credit is the vast majority of the effective money supply
Cash will be king for a long time
Printing one's way out of deflation is impossible as printing cannot keep pace with credit destruction (the net effect is contraction)
Debt will become a millstone around people's necks and bankruptcy will no longer be possible at some point
In the future the consequences of unpayable debt could include indentured servitude, debtor's prison or being drummed into the military
Early withdrawls from pension plans will be prevented and almost all pension plans will eventually default
We will see a systemic banking crisis that will result in bank runs and the loss of savings
Prices will fall across the board as purchasing power collapses
Real estate prices are likely to fall by at least 90% on average (with local variation)
The essentials will see relative price support as a much larger percentage of a much smaller money supply chases them
We are headed eventually for a bond market dislocation where nominal interest rates will shoot up into the double digits
Real interest rates will be even higher (the nominal rate minus negative inflation)
This will cause a tsunami of debt default which is highly deflationary
Government spending (all levels) will be slashed, with loss of entitlements and inability to maintain infrastructure
Finance rules will be changed at will and changes applied retroactively (eg short selling will be banned, loans will be called in at some point)
Centralized services (water, electricity, gas, education, garbage pick-up, snow-removal etc) will become unreliable and of much lower quality, or may be eliminated entirely
Suburbia is a trap due to its dependence on these services and cheap energy for transport
People with essentially no purchasing power will be living in a pay-as-you-go world
Modern healthcare will be largely unavailable and informal care will generally be very basic
Universities will go out of business as no one will be able to afford to attend
Cash hoarding will continue to reduce the velocity of money, amplifying the effect of deflation
The US dollar will continue to rise for quite a while on a flight to safety and as dollar-denominated debt deflates
Eventually the dollar will collapse, but that time is not now (and a falling dollar does not mean an expanding money supply, ie inflation)
Deflation and depression are mutually reinforcing in a positive feedback spiral, so both are likely to be protracted
There should be no lasting market bottom until at least the middle of the next decade, and even then the depression won't be over
Much capital will be revealed as having been converted to waste during the cheap energy/cheap credit years
Export markets will collapse with global trade and exporting countries will be hit very hard
Herding behaviour is the foundation of markets
The flip side of the manic optimism we saw in the bubble years will be persistent pessimism, risk aversion, anger, scapegoating, recrimination, violence and the election of dangerous populist extremists
A sense of common humanity will be lost as foreigners and those who are different are demonized
There will be war in the labour markets as unempoyment skyrockets and wages and benefits are slashed
We are headed for resource wars, which will result in much resource and infrastructure destruction
Energy prices are first affected by demand collapse, then supply collapse, so that prices first fall and then rise enormously
Ordinary people are unlikely to be able to afford oil products AT ALL within 5 years
Hard limits to capital and energy will greatly reduce socioeconomic complexity (see Tainter)
Political structures exist to concentrate wealth at the centre at the expense of the periphery, and this happens at all scales simultaneously
Taxation will rise substantially as the domestic population is squeezed in order for the elite to partially make up for the loss of the ability to pick the pockets of the whole world through globalization
Repressive political structures will arise, with much greater use of police state methods and a drastic reduction of freedom
The rule of law will replaced by the politics of the personal and an economy of favours (ie endemic corruption)

Well, we're going to be dealing with oil shortages soon enough, whether it's a man-made scam or Natures limits. All your dreaming of infinite oil and driving around in 8 cylinders like it's 1957 won't make a dime's worth of difference.

http://theautomaticearth.blogspot.com/2009/06/june-17-2009-40-ways-to-lose-your.html

Deflation is inevitable due to Ponzi dynamics (see From the Top of the Great Pyramid)

Good. It's about time prices came back down from their insanely inflated bubbleland levels.

The collapse of credit will crash the money supply as credit is the vast majority of the effective money supply


Good.


Cash will be king for a long time

It's been king in my book.



Printing one's way out of deflation is impossible as printing cannot keep pace with credit destruction (the net effect is contraction)
Debt will become a millstone around people's necks and bankruptcy will no longer be possible
at some point In the future the consequences of unpayable debt could include indentured servitude, debtor's prison or being drummed into the military

Early withdrawls from pension plans will be prevented and almost all pension plans will eventually default

We will see a systemic banking crisis that will result in bank runs and the loss of savings

Prices will fall across the board as purchasing power collapses
Real estate prices are likely to fall by at least 90% on average (with local variation)

Again, good. This is nothing more than prices returning to non-hyped levels.


The essentials will see relative price support as a much larger percentage of a much smaller money supply chases them
We are headed eventually for a bond market dislocation where nominal interest rates will shoot up into the double digits

How is a destroyed credit market going to support this?


Real interest rates will be even higher (the nominal rate minus negative inflation)
This will cause a tsunami of debt default which is highly deflationary

I've been thinking that there is going to be deflation in the neat term. You only hear "inflation soon! Buy gold and this or that now!" on all the MSM outlets (Glenn Dreck, etc). Inflation fears are hyped up because Jews want to you to trade dollars, whose value will increase, for gold, which is in a commodity bubble right now.


Government spending (all levels) will be slashed, with loss of entitlements and inability to maintain infrastructure

Finance rules will be changed at will and changes applied retroactively (eg short selling will be banned, loans will be called in at some point)

It already is. Remember last fall when Bear Stearns was tanking and they halted short selling? Jews will openly renege when the goyim are beating them with their own rules. I've had Jews at Scottrade call me up and threaten to seize my account when I started making money trading ETFs.


Centralized services (water, electricity, gas, education, garbage pick-up, snow-removal etc) will become unreliable and of much lower quality, or may be eliminated entirely
Suburbia is a trap due to its dependence on these services and cheap energy for transport
People with essentially no purchasing power will be living in a pay-as-you-go world
Modern healthcare will be largely unavailable and informal care will generally be very basic

This is pretty much the case now. If you seek medical treatment for anything, the chances are you will find yourself in front of a totally incompetent turd world "doctor" (Indian, Pakistani, etc).

Universities will go out of business as no one will be able to afford to attend

Good. Let the liberal "professors" have to do something productive for a change. Or they can starve and die. Doesn't make a difference to me, really. They don't care when you fail an exam, so I don't care when they fail the exam of life. Hope they studied up for the final.


Cash hoarding will continue to reduce the velocity of money, amplifying the effect of deflation
The US dollar will continue to rise for quite a while on a flight to safety and as dollar-denominated debt deflates
Eventually the dollar will collapse, but that time is not now (and a falling dollar does not mean an expanding money supply, ie inflation)
Deflation and depression are mutually reinforcing in a positive feedback spiral, so both are likely to be protracted

I'd say he sounds like helicopter Ben here, but he already said you can't print your way out of deflation.


There should be no lasting market bottom until at least the middle of the next decade, and even then the depression won't be over

Translation, the Jew based FIRE economy won't be able to make a comeback and we'll actually have to ......HORROR.....manufacture goods.


Much capital will be revealed as having been converted to waste during the cheap energy/cheap credit years

More importantly, most people will wake up and realize they've pissed away their most productive part of their lives by living Jew inspired frivolous lifestyles. This is especially true for feminist brainwashed women.


Export markets will collapse with global trade and exporting countries will be hit very hard

That's China's problem. And their neighbors.


Herding behaviour is the foundation of markets
The flip side of the manic optimism we saw in the bubble years will be persistent pessimism, risk aversion, anger, scapegoating, recrimination, violence and the election of dangerous populist extremists
A sense of common humanity will be lost as foreigners and those who are different are demonized
There will be war in the labour markets as unempoyment skyrockets and wages and benefits are slashed

HAHAH, I wonder what his idea of "dangerous populist extremist" would be? Funny that he hints at racial strife but doesn't go so far as to acknowledge the politicalconsequences (i.e. violent racial conflict). I doubt there are enough racially aware whites to find any kind of salvation through election of a "dangerous populist extremist". I don't know what else he could be hinting at here.

We are headed for resource wars, which will result in much resource and infrastructure destruction
Energy prices are first affected by demand collapse, then supply collapse, so that prices first fall and then rise enormously
Ordinary people are unlikely to be able to afford oil products AT ALL within 5 years

Yeah, and those markets will be Obamaified, I mean "nationalized" at that point.

Hard limits to capital and energy will greatly reduce socioeconomic complexity (see Tainter)
Political structures exist to concentrate wealth at the centre at the expense of the periphery, and this happens at all scales simultaneously
Taxation will rise substantially as the domestic population is squeezed in order for the elite to partially make up for the loss of the ability to pick the pockets of the whole world through globalization


This is in process now, but I believe it's going to be SEVERELY limited due to increasingly ineffective enforcement. Especially if there is significant collapse of the banking system and its attendant electronic money system. Growth of a cash or even scrip based economy as people turn away from Jew banks means the increase of the "underground economy".



Repressive political structures will arise,


WILL ARISE?!?!?!! What does he think we are living in now, UTOPIA?

with much greater use of police state methods and a drastic reduction of freedom

The rule of law will replaced by the politics of the personal and an economy of favours (ie endemic corruption)

Ok, this guy is out of touch. This has been the case for quite some time. If anything there will be LESS corruption as artificial, Jew based centralized political structures become replaced with organic, local ones.


I agree with the fact of most of what this guy is saying. However, he does not have the proper perspective, since he makes it sound like its going to be a disaster. Most of what he writes is actually desirable de-judification of the economic system. Cash based economy? My money's value actually holding it's value or even increasing in value over time? Oh no, what am I going to do without Jews to lend me ever devaluing dollars at usury rates??!?!?!?!?