Rise in World Oil Use and a Possible Shortage of Supplies Are Seen in the Next 5 Years

New York Times, By James Kanter, July 9

Paris - Despite four years of high prices and warnings about climate change, a new report Monday predicted that world oil demand would rise faster than previously expected over the next five years while production slips, threatening a supply crisis.

In the report, the International Energy Agency, which is based in Paris and advises 26 industrial nations, said that global oil demand would rise by an average of 2.2 percent a year from this year to 2012, up from a forecast in February of 2 percent annual growth from 2006 to 2011.

The share of world oil consumption represented by the developing world, including emerging industrial economies, will rise to 46 percent of global demand by 2012 from 42 percent, the report said.

“Demand is growing and as people become accustomed to higher prices, they are starting to return to their previous trends of high consumption,” said Lawrence Eagles, head of oil markets analysis at the energy agency, which is linked to the Organization for Econonic Cooperation and Development, also based here. “It’s important that we have more investment and a greater emphasis on energy efficiency.”

[...]

The world “needs more than three million barrels per day of new oil each year to offset the falling production in the mature fields outside of OPEC,” Mr. Eagles said.

[...]

Mr. Eagles said that biofuels, a renewable source of energy produced from plants, were unlikely to be a quick solution. Factories to make biofuels are becoming common, but agricultural products that are the basis for the fuels are getting scarcer. Prices of this feedstock — including corn, sugar, soybeans, wheat and palm oil — have risen sharply, making the fuel production increasingly expensive.

By 2012, the agency said, biofuels will still account for only 2 percent of global energy supplies.

Salon.com, Andrew Leonard, July 9

The first sentence of the executive summary of the International Energy Agency's (IEA) influential "Medium Term Oil Market Report," [PDF] released today, states the broad outlines of the problem baldly: "Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012."

Demand for oil products -- primarily transportation fuels -- is growing fast. You can blame all those developing countries whose populations are approaching the critical $3,000 per capita GDP level -- that magic moment when, according to the IEA, "a middle class usually emerges, eager to purchase cars, fly in aeroplanes, install air-conditioners and, more generally, use energy-consuming appliances." Don't blame a lack of refinery capacity -- the IEA says investment in refinery upgrades is proceeding apace, and is not likely to be a problem in the near future. But overall, supply of the raw product -- oil and gas -- is having a harder and harder time keeping up with demand.

This would seem to be the definition of a world approaching "peak oil" -- that moment when supply stops growing and begins to decline, while demand continues to chug along. But it is not until Page 30 of the IEA's very detailed 82-page report that those all important words are even mentioned. Here are some excerpts from the critical section:

[...]

To drastically summarize the report: The problem is not that the world is running out of oil, but that right now, offshore oil rigs are scarce and expensive, skilled labor is tight, transport infrastructure is limited, and political considerations such as "resource nationalism" in states such as Venezuela and Russia and geopolitical risk in Iran and Nigeria are hampering investment and development. Logistics are the real problem, the report seems to be saying, and not the actual amount of oil in the ground. This leads to the conclusion that even though nearly 3 million barrels of new supply will be needed each year just to offset the decline in established oil fields, "above-ground supply risks are seen exceeding below-ground risks in the medium term."

But there's a problem with this formulation that demonstrates a very careful, if not disingenuous, attempt to skirt the troubling implication of "peak oil." Peak oil does not mean, as has been emphasized a thousand times before, here and elsewhere, that "the world is running out of oil." It means that "the world is running out of cheap oil."

And that interpretation seems to be completely justified by the IEA report...

The Oil Drum has a thread on the report here: The International Energy Assocation's Medium-Term Oil Market Report.

Many requests to bring this out to its own thread. Have at it. (There is also a very high quality discussion on this topic taking place in our DrumBeat today here...)

The IEA report can be accessed (for the time being) at this link:

http://online.wsj.com/public/resources/documents/iea20070707.pdf

(Thanks to Tim Iacono from The Mess That Greenspan Made for the tip on this free link.)

Oil and gas shortages likely within 5 years: report

Reuters, By Chris Baltimore, July 13

WASHINGTON - Proponents of "peak oil" -- the theory that global crude oil production has hit its zenith and is headed for a steep decline -- are steamed with a U.S. oil industry group's findings that the world has plenty of oil.

Next week the U.S. National Petroleum Council -- a board of high-level U.S. oil industry executives -- releases its study titled "Facing the Hard Truths about Energy," conducted at the behest of Energy Secretary Sam Bodman.

According to the report's executive summary obtained by Reuters, the world is not running out of oil but there are "accumulating risks" to securing supply through 2030.

Peak oil theorists say such findings gloss over Bodman's request to study the issue in detail.

"They've labored mightily and come up with a mouse," said Randy Udall at the Association for the Study of Peak Oil and Gas, whose group dismisses the report as "petro Prozac."

"Give me four college students and two weeks, and I could do better," Udall said.

[...]

Such findings irk Rep. Roscoe Bartlett, the Maryland Republican and co-chairman of the Congressional peak oil caucus, who has hounded the Bush administration on the peak oil issue.

"I don't think (the council) did what they asked them to do," Bartlett said in his office this week, brandishing a closet-full of charts and graphs that map out various world oil consumption scenarios. "We're disappointed."

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Oil Drum commentary here: The NPC Report...