Physicist Aleklett Says Peak Oil Led to Dubai Crisis
In a piece on his personal blog posted Tuesday, Swedish physicist Kjell Aleklett posits that peak oil, as well as faulty predictions by the IEA, led to the current debt crisis in Dubai. Although part of the United Arab Emirates, an oil-rich member of OPEC, Dubai itself is oil-poor, and thus relies on other sources of income like tourism and real estate. As the global recession hit these areas hard, Dubai found itself in financial hot water.
Aleklett connects peak oil to Dubai’s current situation in two ways. First, Dubai is a city-state that is heavily dependent on tourist travel, and its many attractions are meant to be enjoyed by people who would travel to Dubai by air. In light of peak oil, a phenomenon Aleklett wholeheartedly believes in, aviation will not be able to expand in the future, and thus Dubai’s economy is in serious trouble.
Secondly, Aleklett points out that huge investments in Dubai’s infrastructure were made based on predictions issued by the International Energy Agency. In their World Energy Outlook five years ago, they foresaw oil production in 2030 to be over 120 million barrels per day, while the outlook in Aleklett’s new report “The Peak of the Oil Age” is closer to 75 million bpd. And though Dubai is certainly the first to have made a mistaken investment based on the IEA’s overly optimistic outlook, they most likely won’t be the last.
This post comes just a few weeks after Aleklett blasted the IEA for downplaying the scale of future oil shortages. He contended that IEA supply figures have become highly politicized, and their predictions of oil consumption in the coming years are unrealistic. The main reason for the disagreement seems to stem from the alleged productivity of new oil fields. The IEA contends such fields will more than fill the supply gap, while Aleklett believes that the oil contained therein is too costly and difficult to get to, making it worth little.
If Aleklett is correct in his assessment, Dubai will likely not be the last nation to find itself basing investments on faulty data and finding itself in trouble. Furthermore, if his future oil supply predictions are correct, we’re in for a bumpy ride. With 10 million barrels per day less than that what we’re producing now, oil prices would soar as would the prices of associated products like heating oil, and the economy would have a hard time once again.