Washington Capitulates: Peak Oil Is Real
Doug Hornig, August 28th, 2009
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Doug Hornig, Editor, Casey's Energy Opportunities
Each year, generally in May, the Energy Information Administration publishes a less-than-eagerly-anticipated tome called the International Energy Outlook, 250+ pages of mind-numbing text, charts, graphs, and tables.
No one reads it. The mainstream media ignore it.
It's the product of the best prognosticators in the Department of Energy. Okay, that may be what puts most people off. But if you're patient enough to dig into it, it will cough up some fascinating nuggets of information.
The present edition is no exception. The report refrains from spelling out the conclusion that seems most obvious from its data. However, confirming a trend begun just last year, the 2009 edition clearly reveals that the government has been forced to admit that Peak Oil is coming. Moreover, it's expected to arrive much faster than was believed as recently as two years ago.
This represents a remarkable turnaround in the agency's opinion. Up until 2008, they were predicting unbroken growth in world oil supplies for the next two decades. But in '08 and '09, the rosy picture turned decidedly unrosier.
Before we look at the numbers, a couple of notes on terminology. The EIA makes its projections based on what its analysts call the "reference case," i.e., average economic growth. It also provides estimates for better- and worse-case scenarios, but the reference case represents the best guesses they have.
Oil (as we generally think of it), upon which most of the world economy depends, is termed "conventional liquids," i.e., the stuff that comes gushing up from under Saudi sands. "Unconventional liquids" - extra-heavy oil, bitumen, coal-to-liquids, gas-to-liquids, and biofuels - are also covered in the report, as we'll see, but conventional is far and away the most important one at this moment in history.
With that in mind, by 2007 the IEO was in its final year of irrational exuberance, confidently predicting that world production of conventional liquids would be 107.5 million barrels/day (up from 81.9 in 2005). That dovetailed nicely with a forecast for world demand of 118 million b/d, with 10.5 million barrels of unconventional liquids taking up the slack.
By '08, they had put the info into table form, and look what happened:
