The International Energy Agency’s (IEA) chief economist has warned that global crude oil production is likely to peak in about 10 years, at least a decade earlier than most governments had estimated.
Speaking to The Independent newspaper in London, IEA chief economist Dr Fatih Birol warned that the world is heading for a catastrophic energy crunch that could cripple a global economic recovery, because most of the major oil fields in the world have passed their peak production.
Dr Birol said higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course.
In the interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted. But the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an "oil crunch" within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said.
"One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day," Dr Birol said. "The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously.”
Dr Birol also warned that there will inevitably be an increasing influence by the regions that still have oil. "The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future," he said.
The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong.
"If we see a tightness of the markets, people in the street will see it in terms of higher prices, much higher than we see now. It will have an impact on the economy, definitely, especially if we see this tightness in the markets in the next few years," Dr Birol said.
"It will be especially important because the global economy will still be very fragile, very vulnerable. Many people think there will be a recovery in a few years’ time but it will be a slow recovery and a fragile recovery and we will have the risk that the recovery will be strangled with higher oil prices," he told The Independent.