The optimism typically found in the International Energy Agency’s annual World Energy Outlook report is strangely missing this year. Instead, the IEA is taking a far more sober perspective on the world’s oil-consuming future due to our ever-greater reliance on costly unconventional oil sources.

Output from currently producing fields is projected to fall precipitously, looking ironically like the steeply declining trajectory of peak oil’s Hubbert curve. (I say ironically because the IEA has historically denied the existence of peak oil.) According to the report, by 2035 three quarters of currently operating oil fields won’t be producing anymore. In fact, current fields are only expected to account for less than one fifth of that year’s production.

That leaves over 80 per cent of the IEA’s 2035 production projection coming from new oil fields, ones that either haven’t yet been developed or haven’t even been discovered. And the contribution from that undiscovered category alone is still far greater than the one from currently producing fields. That’s a tall order for new field discovery.

Undeveloped or undiscovered oil fields, growth in tar sands production and increased reliance on natural gas liquids account for all the expected growth in world oil production over the next two and a half decades. Curiously absent from this list is any contribution from conventional oil production—you know, the type you can afford to burn in your car, the type the global economy can afford to use to power transoceanic trade? According to IEA projections, it now appears that the production of conventional oil peaked—dare I say it?—back in 2006.

Of course that doesn’t mean the world is literally running out of oil, as the World Energy Outlook emphasizes with its forecast of ever-greater reliance on unconventional oil resources. But for these resources to become legitimate reserves, they have to be accessed at prices consumers can afford to pay. Yet even the IEA acknowledges that oil prices as high as $200 per barrel will be needed to make these resources economically viable in the future.

And therein lies the greatest weakness of their projections. The agency’s forecast rightly projects that oil prices will soon rise to triple-digit range—albeit nowhere near the pace that would be required to drive their supply forecast for robust growth in the use of unconventional oil. But nowhere is there any appreciation for what that would mean for world economic growth.

The global economy experienced its most severe post-war recession after its brief initial encounter with the very same prices that are now being forecast for our oil-consuming future. And that recession occurred despite the mitigation of record fiscal stimulus and bailouts that have left countries like Ireland bankrupt and may potentially threaten the solvency of creditor countries like the UK.

So what are the chances our economy will ever be able to afford to burn the oil that the IEA’s supply forecast says we’ll find?

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  • Artreides

    Jeff, I am not an oil-industry type, so bear with me, but I keep hearing about smaller companies buying up old fields that were thought to have been totally milked of economically accessible oil. These firms are said to be applying new techniques to tap into oil that previously was not accessible. I understand that your point is that these new techniques are expensive and that those prices will be reflected in the price of gasoline. But the flat panel that I bought for $1,200 last weekend would've been $10,000 five years ago (or I guess more accurately, the technology didn't even exist to build it at a consumer level). Won't we see the expertise, equipment and application of those new techniques drop in price as they shift towards becoming conventional?

  • Rojelio

    From listening to various experts that I really trust, (guys like Jeff Rubin, Chris Martenson, Richard Heinberg etc….), it is very difficult to make the case that conservation, efficiency and technological prowess can sustain business as usual, much less expand economic growth as we know it. History shows that great civilizations and empires build up with excess food and energy with enough left over to waste. Granted, the US still wastes food and energy in epic proportions, but I cannot believe this can last.

  • Rojelio

    I'm not an oil expert either. Interestingly though, when looking at Hubbert's curve, doesn't the apex of peak oil mean that ironically, the world is awash in more oil than at almost any other time in history?
    Doesn't this make it exceedingly difficult to “get off oil” right at the time when we need to think the most obsessively about alternatives?

  • Zekeput

    Here's how I look at “new technologies”. Doctor tells me I have a terminal disease which will kill me in a matter of months but a new technology may come along that will save my life. Do I walk out of his/her office full of hope or do I walk out figuring I better get my affairs in order.

    As far as the “new technologies” resurrecting old fields, small companies are going into old fields and milking, literally, small amounts out. These amounts are too small for a large company to mess with.

    The thing to remember with oil, it's always, always the amount coming out of the ground not how much is in the ground. The key issue here is there enough to meet demand or do we have to start rationing? At some point priorities will have to be set. Drive to work or eat, that type of thing. Shortages mean price increases. How expensive does gas have to be before it impacts how I live? The poorer you are, the quicker it is too expensie.

    Personally, I think this is a far more complex issue than the vast majority of people think. Right now, it's all at the abstract level on the blogs/comments. The people commenting are, obviously, of an income level that hasn't been impacted yet. The poor aren't commenting, they're way too busy making a living. At the blog/comment level, it's, typically, an intellectual discussion. It, most certainly, is an intellectual discussion in the media and Americans do love their media. Getting your information in ten second bursts leaves a lot more time for football, American Idol or some other entertain the masses program. More like lambs to the slaughter from these old, cynical eyes.

  • Signup_12345a

    Technology is not energy itself, but rather the intelligent application of external (non-human/livestock) energy to do useful work. (the work in question doesn't even have to be physical in nature – in the case of resource extraction it sure is though)

    As soon as the work required extract oil matches the amount of energy found in the oil, extraction of unconventional resources won’t make sense from an net energy-perspective any more. Net energy is critical when evaluating the viability of unconventional extraction – having to burn up 1-2 units of energy for every 3 units extracted isn't a good prospect.

    *Not to mention in the case of the tar sands, destroying enormous amounts of fresh water and squandering natural gas which could be put to better use.

    The other thing is that developing new technologies to extract oil may not work out if capital required for R&D disappears. (peak oil = no growth (to service existing debt))

  • JB

    Dear Jeff,

    Interestingly, the IEA reports do not say a thing about the key issue of the EROEI (energy return over energy invested) of the remaining hydrocarbon reserves (oil, gas and coal). Yet, there is no way that we will be able to extract hydrocarbons remaining in the ground if their EROEI is negative (unless we have another very high EROEI energy source -nowhere in sight- to somehow subsidize the extraction).

    The World is currently rapidly sliding down the net energy curve,,, There are key regional and country differences in that rate of sliding down. This will likely have far reaching geopolitical consequences in the years to come as we all know that below a certain critical net energy threshold complex societies simply start desintegrating.

    JB

  • Traditional optimist

    There is always a solution to the problem and no need to obsess. A return to the age of steam might solve everything. More trains, ships burning coal or wood.

  • Jsr

    Jeff, you are right to say that the IEA has indeed gone through a quiet revolution by refering to the Peak Oil. I've actually just written a post in which I refer to some of the key figures that argue the Peak Oil has already happened – or is just about to happen, and reflect on the implications of this geological reality. The post is named “What Peak Oil means and you can benefit” (http://makingsenseofthings.info/2010/11/peak-oil/) and I hope it will stir further exchanges on this fascinating, if daunting, topic.

    jsr – http://makingsenseofthings.info

  • Optik

    I guess a steam-punk world of flywheel batteries and airships would result in a massive human die-off as populations stabilize to the level that can be supported by that tech. I wonder if a world like that would be as nasty and brutish as the Victorian era.

  • Traditional optimist

    I don't see all this waste you are talking about. Except maybe waste of farmland to produce ethanol.

  • Traditional optimist

    Not with Obamacare.

    Most of the rest of the non-western world is still happy burning charcoal and nothing will bother them. They don't travel and never will.

  • Traditional optimist

    As long as the input costs are under control and the output product is of greater use to society, the production will continue. The sands of this continent are our salvation. The water is extensively recycled and there is a lot available. Nuclear energy input here would be a real boon.

  • Signup_12345a

    Nuclear energy? Sounds expensive – at least in Canada the costs as astronomical.

  • Signup_12345a

    *are

  • Rojelio

    Well, for example, we throw away more than 25% of our food. We also feel the need to drive 6,000 pound SUVs back and forth from the suburbs which is a complete waste of energy. We are lame at recycling. We don't collect methane at most of our landfills. Check out the video “the story of stuff” to get mind-numbing statistics on how much of the crap that we buy at big box stores winds up in the landfill very soon after purchase. And on and on….

  • Rojelio

    Our agricultural system is one big giant conversion of oil to food at this point. I see no good explanation for how we're going to comfortably sustain 7 billion people in the near term. We're supposedly going to 9 billion in a few years. I see no scenario where this is even remotely possible with our triple threat of energy scarcity, environmental degradation and financial collapse.

  • Traditional optimist

    It's called lifestyle and completely sustainable at some level depending on an individual's financial level. Chomsky calls this Diversion along with pro sports etc. and keeps people happy in a society with much excess wealth. You sound like you would be more at home in Bangledesh.

    Recycling is a waste of time and should be incinerated to produce steam.Methane is also not collected from farmers with cows. If it doesn't pay don't do it. Maybe with oil at $200 this will happen.

    According to Bjorn Lindstrom all the trash from the 21st century will fit in a pit about 100 feet deep and 10 miles on an edge. Nothing to worry about.

  • Traditional optimist

    I bet most of the cost is fighting NIMBY and WWF/Greenpeace, etc.

  • Hoz_Turner

    I mentioned Jeff Rubin in an article that I wrote for The Journal (a newspaper in the UK).

    You can find it here:-

    http://www.highbeam.com/doc/1G1-241745203.html

  • richard in norway

    have any of you guys been factoring in confiscation of oil fields by the military. you know that it's not possible to wage war without a reliable source of oil, some might suggest bio fuels and yes they would work but a fighter plane running on bio is moving a least 5% slower than its petrol head brother and a fighter which is going 5% slower is a dead fighter plane. i reckon that when the generals wake up to the fact that oil is running out they will want to take steps to ensure that the military has enough oil to fight wars up to 40 years in the future and the only way this could be guaranteed would be military control of oil fields particular domestic ones