IEA: Peak Oil and Resulting Crude and Heating Oil Price Spikes 10 Years Away
Given recent news and trends about oil, it would seem like we’ve got too much of the stuff. Demand remains low, prices remain far below last summer’s spikes, and storage space is full nearly to capacity. So it may sound surprising that we’re actually running out of crude faster than many governments predicted, according to the International Energy Agency’s latest assessment of oil supplies and production levels.
Yesterday, The Independent (UK) science editor Steve Connor reported that, “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.”
Dr. Fatih Birol, the chief economist at IEA in Paris, told the Independent that the “public and many governments appeared to be oblivious to the fact that the oil on which modern civilization 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.”
The term “peak oil” refers to a time in the future when crude oil essentially maxes out and production begins to decline. Most geologists and economists today generally believe that peak oil is real, but some do not. There are scientists and economists who think the theory doesn’t give enough weight to advances in technology that will increase oil supply and reduce demand. They also feel that the theory is too inflexible in its assumptions.
However, the bigger question isn’t if we’ll have to deal with peak oil, but when. And according to the IEA report, we’re about to face it.
The report is the first detailed assessment of more than 800 oil fields in the world (three quarters of global reserves) and found that most of the biggest fields have already peaked. The rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. 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 this report is true, then heating oil customers – and all consumers of crude products – will be feeling the ultimate price pinch in this lifetime. “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,” Dr. Birol told the Independent. Birol and the IEA aren’t the only ones predicting that peak oil will happen sooner rather than later. Some speculators think it’s already occurred.
The International Energy Agency believes peak oil will come perhaps by 2020. But it also believes that we are heading for an even earlier “oil crunch” because demand after 2010 is likely to exceed dwindling supplies. Heating oil customers should start thinking now about what will happen if these predictions prove correct.
There are, of course, other sources of oil, such as the massive tar sands in Alberta, Canada. But environmentalists and other economists are not especially keen on using those as a back-up plan.
Right now, we are experiencing an oil market with low demand and high supply. But don’t let that stop you from buying a new, energy efficient furnace and making other weatherizing adjustments to your home. Heating oil users can also hope that development of biofuel-based heating oil will continue and eventually completely replace petroleum-based oil. In the meantime, anticipating a volatile market and rising prices will best position heating oil customers for what could be an energy crunch. We’ll be keeping a close watch on this topic considering the immediate consequences it will have on heating oil customers.