The IEA is the bestest agency in the world at admitting peak oil without actually admitting peak oil. They’ve now achieved a record – three years in a row of precisely matching the language and predictions of the peak oil community without actually saying the words. Matthew Wild points out the incredible overlap:
According to the IEA’s latest Oil Market Report, published August 11, global demand will reach 86.6 million barrels per day in 2010, and then 87.9 million barrels per day in 2011, assuming a continuing global economic recovery. This means demand is set to pass the all-time high of 86.9 million barrels per day established in 2008 before the global economic downturn.
The figure has been given significance by those that say oil peaked midway through 2008. Peak oil refers to the time of maximum production – the high point of the oil output bell chart, after which, as geologist M King Hubbert showed, output will diminish even though much oil remains to be extracted. If oil did peak at 86.9 million barrels per day, then demand would be expected to overtake supply early in 2011.
Wild goes on to add that he personally doesn’t think oil has peaked (which isn’t at all the same thing as saying he doesn’t believe we are facing peak oil – a minority of peak oil thinkers believe Iraqi oil production will delay the peak into the middle of this decade), but that the most important message is that there is an emerging consensus that if economic growth can be re-established, we almost certainly can’t pump enough oil to fuel it.
Fatih Birol’s mantra – “The era of cheap oil is over” is precisely taken from the peak oil movement, and indeed, the last two IEA forecasts have predicted increasingly tight supply constraints and year over year declines that astonished even peak oil thinkers (above 6% in some scenarios). The IEA still doesn’t call it peak oil, and claims that absolute reserves are comparatively plentiful and that the issue is development of resources. That said, however, last year’s whistle-blower scenario, who accused the IEA of bowing to pressure from the US and other nations to exaggerate world reserves does sort of undermine that credibility.
The more important question is whether the IEA’s belated endorsement of basically every tenet of peak oil theory has led them to take on the wrong language. The peak oil movement has gently moved away from using the framing terms about “cheap oil being over” – this was common in the early years, from about 2003 until 2008, whereupon people began to realize that the problem with this language was that it didn’t adequately portray to people the degree to which peak oil intersects with and manifests with economic problems.
That is, when someone says “the era of cheap oil is over” they probably envision a steady price rise of the sort we saw in 2008, where oil eventually hit $147 barrel – and indeed, I think this is what many people in the peak oil community initially envisioned – that the price of energy would rise steadily, perhaps rapidly, making energy resource unaffordable to many people, but also having the balancing effect of making renewable and unconventional energies more competetive and directly pushing people into the kinds of behavior that make sense when gas, heating and other costs rise steadily.
But that’s not what happened. What happened is that the economy crashed, oil prices declined somewhat, and oil remained hard to afford for many people, especially the increasingly large number of poor, but “the era of cheap oil” didn’t end, particularly for people who adapt quickly to new situations and now barely remember the days of gas under $2.
While it is literally true that in an unfolding deflationary scenario oil will no longer be perceived as “cheap” because it will be unaffordable, it isn’t the case that oil won’t ever seem *comparatively* cheap – and this is the reason the IEA may want to take a lesson from the Peak Oil Community and change their language. What I talk about, for example, is the “affordability” of energy resources – not their absolute price. And what I tell people is this – that you will never know from one month or year to the next how much of your income you will have to spend on any of the major energy-linked costs in your life – food, heating and cooling, transportation, etc… It makes it impossible to plan – how much should you be allotting for things? How do you prepare for Christmas when you don’t know if your heating fuel will be affordable? How do you plan for next month when your expenses keep fluctuating and your raises are gone and your job is unstable. And I’m hardly the only peak oil writer who has changed their language, recognizing that the future could play out in complex ways – indeed, probably will.
It is good and useful that Birol and the IEA are sounding the alarm about energy resources – they just might want to watch more carefully what the people they are borrowing their rhetoric from are actually saying .