Allegations of bias at International Energy Agency underscore vagaries of oil projections
Oxford Analytica has a useful analysis of the widely divergent forecasts of oil supply and demand and the controversy surrounding allegations that the International Energy Agency’s figures overstate supply in order to keep prices down.
Excerpts from Oil projections for 2030 vary widely
If pessimistic oil supply forecasts are accurate, the world faces a major energy shock in the medium term. The oil-consuming countries’ watchdog, the International Energy Agency, is accused of massaging long-term forecasts to dispel such disquiet.
In its World Energy Outlook (WEO) 2009, released last month, the International Energy Agency (IEA), as part of its business-as-usual reference case, predicted that world oil supply would grow to 106.4 million barrels per day (b/d) by 2030. In earlier WEOs, the IEA predicted potential growth considerably above 120 million b/d
Sweden’s Uppsala University in November published a report based on analysis of the 2008 IEA World Energy Outlook, estimating that this is a gross overestimate, and a realistic figure for 2030 would be 75 million b/d
Cambridge Energy Research Associates (CERA) last month released a report predicting that world oil supply can reach 115 million b/d by 2030, and post-peak decline will not be sudden and dramatic. Rather, a high-level of plateau production can be sustained for some time.
There is no reason to assume IEA objectivity. Despite its ‘international’ nomenclature, it represents OECD oil consuming and importing countries. This is consistent with highlighting future oil supply threats — primarily lack of investment, which is the constant IEA mantra — and overstating future oil supply potential, as it appears to have done in the past.
The IEA has a bias towards overestimating demand (to encourage investment and access to resources) and supply (to mitigate higher price expectations)
The IEA is not alone in making assumptions, nor is its position the most extreme.
Reports do not take the view that there is a shortage of hydrocarbons as a geological resource. What is unsaid is revealing:
- The possibility that Saudi Arabian and other OPEC members’ stated proven reserves are exaggerated is not discussed, though there are strong grounds to believe that they may be inaccurate.
- OPEC proven reserves are not verified independently and have the unique but unlikely characteristic of remaining constant from year to year — newly proven reserves exactly match annual production.
- When increases have occurred, they have been dramatic and not matched by exploration activity in the preceding year.
There is agreement that crude oil is a finite resource, and production eventually will hit an inflexion point, after which output will decline irreversibly. CERA sees this post-2030, the IEA and UKERC between now and 2030-31, while Uppsala suggests the peak probably has passed.
The key differences are the rate at which production can be increased, and the decline rate of existing and future fields.
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