[Update – the executive summary has now been release – more here]
November 2008. Mark it down as a very important month in world affairs. The same month as American democracy reaches its orgasmic climax, we will see the publication of the most important document, in my view, since the Stern Climate Change Review. On 12 November the International Energy Agency will publish the World Energy Outlook 2008, their yearly analysis of world energy markets. The IEA’s analysis is hugely important, as it is used as the primary reference for governments and companies the world over in determining their energy policies and business strategies, and it has a strong influence on prices.
The publication of this document, in my view, will mark the point where world opinion shifts from optimism to pessimism about the availability of sufficient oil and gas production capacity to meet world demand. Peak oil theory will be widely accepted as an immanent reality (for the uninitiated, see the Energy Bulletin primer or the Wikipedia article).
The IEA releases an energy outlook every year, of course, but there are signs that this one will be different. In the past, they have simply assumed that thanks to market forces, the oil supply will simply keep pace with demand. This led to predictions of continued smooth growth in oil supply, and rather benign prices of around $US60/barrel into the foreseeable future. This year, for the first time, they will examine whether that assumption is true. As the WSJ article explains:
The decision to rigorously survey supply — instead of just demand, as in the past — reflects an increasing fear within the agency and elsewhere that oil-producing regions aren’t on track to meet future needs.
This is not an easy task. The biggest producers, who are part of the OPEC cartel, are notoriously secretive about their detailed field production data. Western agencies have had little choice but to take them at their word. But a growing number of voices are suggesting that they have been exaggerating their potential to ramp up production for many years, and the situation may be far starker than most analysts assumed.
If the IEA report shows that this is correct, then the world economy is in serious trouble. As the gap grows between the surging demand from China and India and the sluggish supply response, oil prices are just going to keep going up. As we have seen recently, when oil gets expensive, so does just about everything else, including food. All of the problems we have seen developing over the last year were just a taste of things to come. Deepening economic woes, growing geopolitical tensions, concerns about shortages and scarcity, and increasing hysteria may be just a few months away.
So the apocalyptic scenario portrayed in the BBC mini-series Burn Up is not totally out of this world. Of course it was exaggerated for dramatic effect, but there is still a disquieting little nugget of truth at its core.