Optimism, thy name is International Energy Agency.
The IEA is the energy policy adviser to the 28 countries of the Organization for Economic Co-operation and Development, among them Canada. The IEA produces a thumping annual report, called the World Energy Outlook (WEO), which is considered gospel among the many governments that use it to help formulate long-term energy policies.
To read the most recent WEO, released this week, you would think the planet is swimming in oil . So fear not - the "peak oil" mob is wrong. The peakists argue that the world will soon reach maximum-possible oil production, and may have already, after which humanity will begin a slow but sure descent into bedlam and bankruptcy. That's because oil consumption and GDP growth are directly linked. Cut the first and the second can only follow.
The WEO authors don't buy into the peakist theory, never have and probably never will. The WEO expects oil production to reach about 105 million barrels a day by 2030, up from last year's 85 million. The production estimate is essentially unchanged from last year. So forget the pokey little hybrid - buy that V8-powered truck you've been dreaming about.
But the WEO team, led by chief economist Fatih Birol, is increasingly finding itself on the defensive. A small but growing number of scientists and oil executives think the WEO is out of touch with reality, that it is a creating false - and highly dangerous - sense of confidence.
On Monday, the day before release of the WEO report, The Guardian newspaper published a front-page article, quoting an unnamed IEA "whistleblower," who said the IEA was under political pressure to exaggerate the future potential production figures to avoid panic in the energy and financial markets. The IEA's executive director, Nobuo Tanaka, dismissed the report as "groundless."
The IEA has, in fact, said the era of cheap oil is finished, that lack of investment could lead to a supply crunch in a few years, and that the oil industry would have to find the equivalent of four Saudi Arabias to overcome the rapid production declines of existing fields.
Still, the WEO report did predict an assuring 105 million barrels a day of supply in 2030.
Total SA, the French oil giant that is pushing into the Alberta oil sands, doesn't buy the IEA's rosy scenario. Total works on the assumption that production will level off at 95 million barrels. Jim Buckee, the former chief executive officer of Canada's Talisman Energy, thinks the IEA prediction is nonsense. The U.K. Energy Research Centre last month said global production of conventional oil could go into terminal decline before 2020. Energy consultant Sadad al Husseini, the former exploration and production chief of Saudi Aramco, the world's largest oil company, said in a presentation this month: "Oil supplies have reached a capacity plateau and will not meet a growth in demand over the next decade."
There are more skeptics. Kjell Aleklett, professor of physics at Sweden's Uppsala University and president of the Association for the Study of Peak Oil and Gas, this week released a study entitled "The Peak of the Oil Age," which concluded that the WEO's production forecast is "unrealistic."
Mr. Aleklett and his co-authors use essentially the same data as the IEA but interpret it in a different way. They and the IEA are in agreement on most issues. They all agree that the oil fields now in production are quickly running out of puff (that is, their "depletion rates" are high). They all agree on the estimated oil volume in the fields yet to be developed and to be discovered. Where they differ is on productivity of the new fields - the ones that, according to the IEA, will more than fill the gap as the old fields amble off to reserve heaven.
History, Mr. Aleklett says, shows that the new fields, generally smaller, are less productive than old ones - note the virtual freefall in production rates from the North Sea fields, which reached peak output in 2000. Another reason is development pace, or lack thereof. The yet-to-be-developed reserves in the WEO report cover 1,874 fields of various sizes that would have to come into production in the next 20 years.
"That is something like eight fields per month coming on stream," Mr. Aleklett's report notes. "Even if the oil exists, it is questionable whether the necessary investment needed to produce such a rapid pace of development can be achieved in timely fashion."
His conclusion is shocking: Production in 2030 will be about 76 million barrels a day. That's about one-third less than the WEO's figure, and some 10 million less than current production. Peak oil, he says, is already here.
Oil investors, take notice. If the IEA has it wrong, as more than a few oil gurus now believe, the current price is the bargain of the century.