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IEA World Energy Outlook 2010: Global crude oil production will never grow again

The International Energy Agency IEA published its World Energy Outlook 2010. http://www.worldenergyoutlook.org/

There are 3 main messages: crude oil production will never grow again, massive investments are necessary to keep that crude production flat and  OECD oil demand will have to go down so that OPEC and Chindia can use that oil. The following graphs are from this file:

  http://www.worldenergyoutlook.org/docs/weo2010/key_graphs.pdf

iea_weo_2010_crude_oil_plateau

Crude oil production follows a straight line which suggests that this graph has not been obtained by real modelling but by a requirement not to show declining crude production. Crude oil is the main refinery feedstock. We cannot fly planes with natural gas liquids which sit on top of the crude to show overall growth. Unconventional oil is expensive and results in high CO2 emissions. It will not drive cars, but vital machinery for food production and transport.

In any case, even if crude production were to stay flat, global crude oil export volumes will decline as demand for oil in oil producing countries goes up and leaves less for export.

iea_weo_2010_incremental_oil_production_by_country

Enormous investments are necessary in the above countries to offset declining crude oil production in existing, maturing fields. The total additional production in the above graph is around 25 mb/d. This would not even fill the wedge “Crude oil: fields yet to be developed”. Therefore, there is a big question mark over whether crude oil production can actually be kept flat.

iea_weo_2010_oil_demand

What’s worse, there will be big fights over how the oil is distributed among different countries. This graph shows that demand for oil in the US, the EU and other OECD countries will have to go down so that OPEC, China and India can grow.

What does this all mean for Australia which is part of OECD on one side but economically linked to Chindia on the other? It means Australia will be between a rock and a hard place. We are going to have to fight for oil imports. If growing quantities of oil are used for mining, for example, to support the government’s expected mining boom Mk2, it can’t be used elsewhere.  And diesel for agriculture and transport of food will be even more important. So who will have to save? The urban motorist, of course. He will be at the end of the priority list. Other options? Anyone?

Governments and banks will have to revise their planning:

(1) Energy policy

The Federal Government’s oil vulnerability report is now outdated by 4 years as it is based on the WEO 2006. My critique was posted here:

29/5/2009
Critique ACIL Tasman liquid fuel vulnerability
http://www.crudeoilpeak.com/?p=793

This must be IMMEDIATELY withdrawn and re-written from scratch

(2) All ABARE and BITRE reports must be reviewed

(3) The aviation white paper has to be revisited

The IEA expects demand for aviation fuel to go up but that can only happen if oil demand for land transport goes down. You can’t go by car to the airport and then expect there will be aviation fuel for your flight.

My critique was here:

17/2/2010
Report card 2009 (part 2): Aviation and airport plans – pies in the skies
http://www.crudeoilpeak.com/?p=1125

(4) State Government planning

All documents in relation to transport planning have to be re-written. In Sydney, the Metropolitan Strategy is obsolete. These were my proposals:

26/5/2010
Submission Sydney’s Metropolitan Transport Plan
http://www.crudeoilpeak.com/?p=1519

(5) Investment portfolios of banks

Banks need now very urgently to revisit their priorities, in particular in relation to oil dependent infrastructure. A number of toll-ways are about to be financed. The above graphs mean traffic will not grow. This is the latest and most urgent example:

21/9/2010
RTA fails to present business case for M2 widening (part 1)
http://www.crudeoilpeak.com/?p=1886

Conclusion: This is now the 2nd WEO warning of the IEA to change course. Will governments and banks finally take notice?

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