Seeking Alpha

Lionel Badal's  Instablog

I’m currently a postgraduate student at King’s College London, Department of Geography. In June 2009, I finished my BA (Hons) International Relations at the University of Exeter, UK. Over the past year, I’ve conducted extensive research on Peak Oil in order to write my degree’s... More
My blog:
seekingalpha.com/art...
  • Peak Oil and the IEA (What they don’t want you to know…) 14 comments
    Sep 5, 2009 04:40 AM

     

    “We are facing a serious threat”

    Dr. Fatih Birol, Chief-Economist of the International Energy Agency (the agency which advices OECD countries on oil, including the US) and “one of the most powerful men on earth” according to the British newspaper, The Guardian[1] has lately attracted extensive media attention.

    Indeed, in a recent interview to the British newspaper, The Independent[2], Dr. Birol was reported of saying that the world was heading for a catastrophic energy crunch that could cripple a global economic recovery.

    The article added, “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”.

    In fact, in 2008 the IEA conducted for the first time[3] a detailed field-by-field analysis of global oil production and its findings are bleak. Asked by a journalist on what the previous analysis relied on, the Chief-Economist of the IEA admitted, “it was mainly an assumption”[4]. In the 2008 World Energy Outlook (the key document on oil used by OECD countries), they have analysed about 800 fields, which account for ¾ of global reserves and more than 2/3 of global oil production[5]. They come to the conclusion that decline rates are far higher than previously thought, between 6.7 and 8.6% a year[6]. As result, they now estimate that to maintain the current levels of oil production (about 85 MBD) by 2030 the world would need to develop and produce 45 MBD; as said by Dr. Fatih Birol, approximately four new Saudi-Arabias[7].  

    Simultaneously, they have analysed all the projects that are financially sanctioned in all the countries in the world (about 230) up to 2015. As it takes five to ten years to produce oil from a new field, they have a clear image of the coming situation. When they add all the projects together (if all of them see the light of the day –unlikely with the current credit crunch[8]-) they will bring about 25 millions barrels per day[9]. However, because of the important decline rates, the world will still be short of “at least” 12.5 MBD before 2015[10]. Asked by a journalist if this means Peak Oil, Dr. Birol answered, “We are facing a serious threat”[11].

    Nevertheless, things are never clear when it comes to the IEA and Peak Oil, especially with Dr. Birol.

     

    “Misquoted by the journalist…”

     

    On the 27th of August[12], David Strahan, a British journalist, asked the IEA press office confirmation that the IEA recognised Peak Oil would happen “in about 10 years” as reported by The Independent.

    Amazingly, an IEA spokesman (initially) answered:

    “I spoke with Fatih who said he was misquoted by the journalist…The article incorrectly made it sound that the total oil production (including unconventional oil etc.) is going to peak at that time. Taking into consideration gains from unconventional oil, oil peak will be later than 2020, more around 2030...”

    The first obvious question anyone would ask is: if Dr. Birol really was misquoted, why didn’t he issue an official statement when the article was published?

    The answer may well be that he wasn’t really misquoted at all.

    Steve Connor, the journalist who interviewed Dr. Birol (also the Science Editor of The Independent) was not prepared to see his reputation and integrity attacked in such a manner.

    Soon after Mr. Connor issued an official complaint (and reminded the IEA the interview was taped) the IEA spokesman, Henning Lohse, issued a rather different statement… This time Dr. Birol no longer argued he was “misquoted”.

    “Fatih Birol feels that the article was confusing. Concerning peak oil, his position is clear and has not changed since WEO 2008… Taking into consideration gains from unconventional oil, oil peak will be later than 2020, more around 2030….”

    To be sure, the Peak Oil sceptics, Daniel Yergin and Michael Lynch (who, by the way recently attacked Dr. Birol[13]) will be delighted to hear that!

    In fact, just a few days ago Michael Lynch apologised to Dr. Birol for “lumping him in with the peak oil advocates”. As reported by Mr. Lynch, “he (Dr. Birol) informs me that the widely-cited Guardian interview[14] misrepresented his views”. Once again, the press seems to be unable to understand Dr. Birol.

    So what does the IEA thinks of Peak Oil? Well, nobody seems to know.

     

    “There is a pack of deceit and economy with the truth here…”

     

    On the 26th of November 2008, I sent an interview request to Dr. Birol, in order to discuss how Peak Oil would affect International Relations (my degree’s dissertation topic). While he was first “delighted” to meet with me (as reported by his assistant), he then cancelled the meeting. Nevertheless, Dr. Birol asked me to meet one of his “senior colleagues” at the IEA, Olivier Rech.

    On the 18th of December 2008, I met Mr. Rech at the IEA HQ in Paris.

    Mr. Rech, who was a key contributor to the 2008 WEO, clearly recognised the reality and seriousness of the impending crisis (yes, Peak Oil is real and yes, ASPO is likely to be right). As an example, he declared that:

    “What we understand today by mobility, such as spending a weekend at 1000 km, maybe in 20 years, the height of exoticism will be to go on a weekend at 20km of distance”[15].

    During the conversation, Mr. Rech also mentioned the difficult topic of global population in a post-Peak Oil world:

    “(Dr. Colin) Campbell effectively says that agricultural production will collapse because fertilisers will run out, by a lack of fuel and that the variable of adjustment to the problem will be the global population. Frankly I don’t know. It is so cataclysmic that me, I, I reach my limits. I reach my intellectual limits on that.”[16] 

    So while the British Government (and many others) declares that it "does not feel the need to hold contingency plans specifically for the eventuality of crude oil supplies peaking between now and 2020"[17], a senior energy expert at the IEA –the body that advices our governments on oil- who wrote part of the 2008 WEO, cannot rule out the death of a significant part of humankind in the coming decades.

    While Mr. Rech asked me to mention that some of his answers did not commit the IEA, the fact that the Chief-Economist of the IEA asked me to meet with him[18], may indicate that his views are far from being isolated in the agency or at least far from being ignored by Dr. Birol. Well at least in private of course.

    Similarly, the newspaper The Guardian reported that another “IEA official” who was at the Poznan conference with IEA’s Executive Director, Nobuo Tanaka, admitted that, “There's a real risk that this thing could collapse”[19].


    “But after his speech he seemed to change his tune…”

    And yet, Dr Birol who seems to be particularly concerned about his career has become a master in playing something that could be described as a “double game” regarding Peak Oil. Depending on the moment (and most likely, the pressures he receives), he publicly admits or denies or admits or denies the seriousness of Peak Oil and its potential effects.

    In June 2004 the BBC[20] supported this claim and gave additional information about who Dr. Birol really is.

    “In public, Mr Birol denied that supply would not be able to meet rising demand, especially from the buoyant economies in the USA, China and India. But after his speech he seemed to change his tune… When BBC News Online followed up by asking if this giant increase in production was actually possible rather than simply a desire he refused to answer. "You are from the press? This is not for you. This is not for the press."”

    Apparently, for Dr. Birol the (hard) truth is neither for the press nor for the public.
     

    “It needs careful and persuasive exposure of agendas…”

    I was also able to meet a former director at the IEA who used to be the boss of Dr. Birol and for him it is very clear, “we have entered the Peak Oil zone”[21]. When I asked him[22] how the IEA in the 2008 WEO (which is under the responsibility of Dr. Birol) could still say that “global oil production in total is not expected to peak before 2030”[23], while as previously mentioned in this article the IEA knows that oil production will decline before 2015, he answered:

    “I used to be Birol’s boss, I even promoted him… he has been at the IEA for over 12 years and is now at a key position. Why do you think so?”

    In fact, it is not in the interest of some IEA member states, in particular its most powerful member, namely the USA, that the agency provides an honest assessment of the situation. Admitting Peak Oil is real also means that you acknowledge our current way of life is about to (radically) change[24]. And not everyone wants the public to know that. Irresponsible, dishonest? Absolutely.

    In The Independent, Dr. Birol also declared that, “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”.

    Why would governments be aware of “the difficulties we may face in the oil supply” if Dr. Birol still argues (regardless of the facts) that global Peak Oil will happen “around 2030”?

    Politicians who have short-term interests, namely elections to win, naturally prefer to support the optimists (few people like to hear the bad news, especially when there is no easy solution). So he should not wonder why most governments simply ignore the threat of Peak Oil. In fact, Dr. Birol who has been at the IEA for over a decade (and as reported to me, one of the strongest deniers of Peak Oil until 2006) holds an important share of responsibility for denying the imminence and seriousness of the situation. The IEA which was setup soon after the first oil shock to advice OECD countries had failed its mission.

    Maybe one day politicians and mainstream media will finally start to investigate what is really going on in the energy sector (including the IEA).

    The following analysis on the Peak Oil debate from Chris Holtom, the former head of British military intelligence, nowadays a strategic consultant to the oil & gas industry, gives valuable information:

    “There is a pack of deceit and economy with the truth here - some wilful, some born of ignorance, or fear of "group-think" related to stock price or employment. It needs careful and persuasive exposure of agendas, motives and possible consequences... Peak Oil is a potential Black Swan event, where the consequences are so great that after it we spend most of our time justifying why we didn’t anticipate it… It is a global issue and global bodies need the clout and courage to address them.”[25]

    There is a parallel here with what happened with the financial crisis and the failure of regulative authorities to control the banking sector at that time. The same is happening now in the energy sector. By the time we realize this, the crisis will be real and… uncontrollable.

    As the US Joint Forces Command concludes:

    “By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD… The implications for future conflict are ominous...”[26]

     

     

    P.S.

    This article was originally submitted to The Oil Drum[27] (one of the leading Peak Oil news webpage). While the editors initially accepted to publish the article, at the very last moment they changed their mind. In other words, an article on Peak Oil was censored by… The Oil Drum (TOD). The reasons why?

    “I know there are at least a few people who think we should be putting the IEA in as favorable light as we can. So I have decided not to run it…” (Gail the Actuary, Editor, 2 September 2009).

    However, to be fair with TOD, some of their members did not support this action:

    “Sorry to hear about what's going on regarding your article and TOD… 1) this is something that TOD should publish, and 2) this kind of censorship, as you point out, isn't something that we should take any part in.” (Jeff Vail, 2 September 2009).

    At the end, they wouldn’t accept it. If even TOD starts to censor information on Peak Oil…

    To put it in the words of Steve Connor, Science Editor of The Independent, “What an odd thing for Oil Drum to be worried about -- so much for the independent journalism of the internet.”



    [1] George Monbiot, "When will the oil run out?", (The Guardian, 15 December 2008),

    <www.guardian.co.uk/business/2008/dec/15/...;

    [3] George Monbiot, "When will the oil run out?" (The Guardian, 15 December 2008), <www.guardian.co.uk/business/2008/dec/15/...;

    [4] Ibid

    [5] Olivier Rech interviewed by the author, (Paris: IEA HQ, 18 December 2008).

    [6] John Kemp, "Oil industry running faster just to keep up?: John Kemp", (Reuters, 19 November 2008), <www.reuters.com/article/reutersComServic...;

    [7] The Times, "World needs four new Saudi Arabias, warns IEA", (Times Online, 12 November 2008), <business.timesonline.co.uk/tol/business/...;

    [8] Spencer Swartz, "OPEC Nations Delay Drilling Projects", (The Wall Street Journal, 10 February 2009), <online.wsj.com/article/SB123421390528464...;

    [9] Fatih Birol interviewed by Andrew Evans, "Fatih Birol of the IEA talks the talk about peak oil", (Aceditor, January 2008), <www.youtube.com/watch?v=BhXZzNaVLJw&...;

    [10] Ibid

    [11] Ibid

    [15] Interview with the author, (Paris: IEA HQ, 18 December 2008),

    [16] Ibid

    [17] George Monbiot, "We spend millions on smallpox, but nothing on this far greater threat", (The Guardian, 14 April 2009),  <www.guardian.co.uk/commentisfree/2009/ap...;

    [18] Email conversation with Sandra Mooney (Dr. Birol’s Assistant), “he (Dr. Birol) would like you to meet with one of his senior colleagues here in the Office of the Chief Economist – Mr. Olivier Rech. ”, 12 December 2008

    [21] Email discussion with the author (under the Chatham House Rule), 4 November 2008

    [22] Interview with the author (under the Chatham House Rule), 18 February 2009

    [25] Email discussion with the author, 14 May 2009.

    [26] USJFCOM, "Joint Operating Environment 2008", (Joint Forces Command, November 2008), page 17 and 19, <www.jfcom.mil/newslink/storyarchive/2008...;

    Themes: iea, peak oil, oil, energy, fatih birol, tanaka, jones, cera, opec, eia, inflation, crisis, aspo
Back To Lionel Badal's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

This post has 14 comments:

  •  
    What Lionel Badal has uncovered bears out my own concerns about the way Peak Oil is debated or ignored. Recent newspapers attacking the concept of Peak Oil by former editors of the Economist and the Daily Telegraph in the most extraordinary terms, such as "Don't pay an attention to them". I do wonder if there are vested interests trying to suppress the debate. Even the BBC's reporting of Peak Oil is scant at best.

    The only reason I see for these denials in face the gathering evidence is that these people believe that if the West admits to Peak Oil it would push up oil prices further and strengthen the economic and political power of Russia and the Middle East to restrict supply further. A UK government minister even suggested that announcing development of Nuclear power plans would calm oil markets.

    I can't help feeling that they believe that if they reduce fossil fuel use under the pretext of reducing carbon admission to counter global warming, they can keep oil prices down.

    The problem with this strategy is that time is not on our side. Lower oil prices in the short term, means less investment and reduces the economic benefit of switching to alternatives. This makes price spikes more likely and could raise prices higher in the next 10 years than they would of been. The economic shocks in the next 10 years could be far worse than the credit crunch.
    Sep 05 12:10 PM | Link | Reply
  •  
    Matt Simmons, writing in Foreign Affairs: "Until the world's oil producers allow third-party audits of the flow rates of the world's largest oil fields, which they have so far been reluctant to do, it is impossible to know just how dire a situation we are in."
    Sep 05 01:25 PM | Link | Reply
  •  
    Interestingly I followed the link to this article from The Oil Drum.
    Sep 05 02:23 PM | Link | Reply
  •  
    As you can see, the article was accepted by The Oil Drum, but then (at the very last moment) cancelled…

    From: Gail Tverberg [GailTverberg@comcast....
    Sent: 01 September 2009 15:52
    To: Badal, Lionel
    Subject: Re: article on Peak Oil and the IEA

    My current plans are to put it up tomorrow. Since it involves a
    European issue, I may put it up late tonight, so it is up for your
    morning tomorrow.

    BUT:

    From: Gail Tverberg
    Date: September 2, 2009 9:04:27 AM EDT
    To: "Badal, Lionel"
    Subject: Re: article on Peak Oil and the IEA

    Lionel,

    I have your post ready, but after thinking about it, I started worrying. The IEA folks are in a terrible position. I worry that we will make things even worse for them. The result could be people losing their jobs, or even suicide.

    I know there are at least a few people who think we should be putting the IEA in as favorable light as we can.

    So I have decided not to run it, at least not for now. Nate pointed out to me that it is well documented, so from that point of view it is not a problem.

    I should have thought this through better before.

    Gail
    Sep 05 07:01 PM | Link | Reply
  •  
    Please, Stop spamming the webpage with your conspiracy theories! (I've reported it to Seeking Alpha)

    On Sep 05 07:02 PM wadosy wrote:

    > the problem these people are having is that the official story doesnt
    > work very well, especially in view of neocons' conviction that they
    > can create their own reality...
    >
    > neocons and reality...
    >
    > ''We're an empire now, and when we act, we create our own reality.
    > And while you're studying that reality -- judiciously, as you will
    > -- we'll act again, creating other new realities, which you can study
    > too, and that's how things will sort out. We're history's actors
    > . . . and you, all of you, will be left to just study what we do.''
    >
    >
    > .
    >
    > history is a story that makes the most sense to the people who write
    > it, assuming for the sake of argument that the historian is honest.
    >
    >
    > ...and the farther along in time a historian gets, the more he can
    > get a sense of what the well-informed shakers-and-movers knew before
    > they shook and moved ---because the stuff the shakers-and-movers
    > expected to happen has happened by the time the historian rewrites
    > history.
    >
    > and so, if peak oil and global warming turn out to be the real thing,
    > the current official history of 9/11 is likely to be trashed. <br/>
    >
    > .
    > if PNAC wanted a new pearl harbor, and PNAC creates its own reality,
    > then PNAC probably created its own new pearl harbor.
    >
    > .
    > none of this is my fault.
    Sep 05 07:05 PM | Link | Reply
  •  
    "the oil drum seems to be a limited hangout neocon outfit... an attempt to obstruct awareness of neocons' motive, means, opportunity, character and prior convictions that put them at the top of the suspect list for 9/11.

    as the situation worsens, the old drum will probably come farther out of the closet... they've always had a pro-zionist bias,"

    LOL
    That is the biggest juxtaposition I can imagine - tonight they have article on Tragedy of the Commons and you think they are Zionists?
    I seriously doubt that, and can see why they dissed this article. What do you all expect to accomplish by convincing the world we are passed the midpoint of oil anyways? Quicker path to war?

    Quality energy, in our case oil, is the fundamental driver of stock market earnings. If we are post peak, the nominal highs are in, for all time.
    Sep 05 09:42 PM | Link | Reply
  •  
    Item 1. This is Lionel's instablog. He should get to call the shots, limit comments, drive the discussion any way he sees fit.

    Item 2. Gail The Actuary's position is indefensible. Suicides my ass. TOD has a hopelessly rose-colored view of OOIP and Alt resources.
    Sep 05 10:30 PM | Link | Reply
  •  
    Can I please request all wadosy spam comments be remove from the site. None of his remarks have anything to do with what Lionel Badal has written about, his last is a link to Suzanne Vega utube video.

    He has made 38 comments on just 5 articles. Some of his comments appear to be anti Semitic with various Jewish conspiracy theories.

    What ever his agenda is its not about investment or economics or even Peak Oil. His pipe line map openduringturmoilcont0... is bonkers and yet strangely professional in presentation, like through Iran and Turkey terminating in Israel or Iran/Pakistan on through the Himalayas to China.
    Sep 06 06:12 AM | Link | Reply
  •  
    What Lionel has done is turn a spotlight upon the IEA at a moment in time when their chief economist has admitted a harrowing truth and then has had second thoughts about his announcement when the powers that be suggest that his revelation could panic the herd. So, Birol is waffling mightily at the moment, sad to watch, actually, must be painful to be in his position at the moment. Poor Gail, one of the TOD editors, knows the truth also, as she and others discuss it on TOD all the time. But she has also been tapped on the shoulder by someone, and has also waffled. Amazing retrench by Gail and TOD, and I'm sure both she and TOD will have a hard time living this one down. Anyway, my hat's off to IEA, to Birol and especiallyto Lionel, as he is the only one so far to have both exposed and held fast to his convictions about seeking and telling the truth.

    Not to worry, as time goes by, other opportunities to reveal the truth will turn up.
    Sep 06 03:37 PM | Link | Reply
  •  
    Typo alert:

    So what does the IEA thinks of Peak Oil? Well, nobody seems to know

    should be "think"
    Sep 06 08:04 PM | Link | Reply
  •  
    Thanks for a great and well-researched post. IEA staff and TOD are only human too. Lionel has done us a useful service in presenting the simple facts of the matter. Birol and others at IEA have told us the truth - oil is going down at 6-8% per year. That they have then put some fluff around that truth doesn't make the truth go away. At that rate global oil production in 2020 will be 50% of 2008 which (I figure) is less than the demand of the world's oil producing countries. There will not be any oil exports by 2020.

    Any effort to swing the world's economy onto a higher than ever recovery course will simply have the oil supply door slammed in its face. The way forwards is downwards, and fast.

    If that truth is acknowledged today there is a chance of a slightly-planned soft landing. Otherwise we will hit the ground from free-fall and it wont be pretty.

    So lets spin this post around all our decision-making friends, our transition town groups, our local councillors. And keep spreading the word, so we can change potential panic into some sort of desperate but planned action.
    Sep 06 09:03 PM | Link | Reply
  •  
    It is truly unfortunate that nobody commenting (incl mr badel) has actually fully read November's IEA WEO. The 6.7% Underlying Decline Rate Observed (UDRO) is a mere subset of total All Liquids. When measured to 2030, IEA expects only a 1.9% UDRO according to their maintenance capacity stats. This occurs 'cuz regular conventional crude plays a decreasing role as the time frame unfolds.

    Having said that, TrendLines Research chastised IEA upon its release. Our model indicates that UDRO will be a more robust 3.7% avg to 2030. It is improbable that IEA's 107-mbd target will be attained. Based on my higher annual loss factor, Peak Oil should occur in 2025 @ 100mbd.
    Sep 06 10:20 PM | Link | Reply
  •  
    Oh Freddy, if you're so sure of a 100 mbp peak by 2025, why can't the world produce more than 85 mbp today, and has been stuck at that level of production since about mid-2005?
    Sep 06 11:17 PM | Link | Reply
  •  
    They don't have to produce more than 85 mbp. The global economy is still in a shambles.
    Sep 07 07:44 PM | Link | Reply
Full index of posts »
Latest Followers

Latest Comments


Most Commented
  1. Peak Oil and the IEA (What they don’t want you to know…) (14 Comments)
Posts by Themes
aspo, cera, crisis, eia, energy, fatih birol, iea, inflation, jones, oil, opec, peak oil, tanaka
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.