This is your last chance. After this, there is no turning back.
You take the blue pill — the story ends, you wake up in your bed and believe whatever you want to believe.
You take the red pill — you stay in Wonderland and I show you how deep the rabbit-hole goes
—Morpheus, from the movie The Matrix
On the eve of the International Energy Agency’s release of its annual World Energy Outlook (WEO), a whistleblower at the IEA claims the agency “has been deliberately underplaying a looming [oil] shortage for fear of triggering
panic buying” in the world markets. As the young fan said to “Shoeless” Joe Jackson, who was wrongly convicted of helping to throw the 1919 World Series, but knew the fix was in, say it
ain’t so, Joe.
Ah, but apparently it is so. Another dose of disillusionment for the naive. A second Guardian informant went so far as to say the situation is really
bad—
The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields
while overplaying the chances of finding new reserves.
The allegations raise serious questions about the accuracy of the organization’s latest World Energy Outlook on oil demand and supply to be published tomorrow –
which is used by the British and many other governments to help guide their wider energy and climate change policies…
A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organization was that it was “imperative
not to anger the Americans” but the fact was that there was not as much oil in the world as had been admitted. “We have [already] entered the ‘peak oil’ zone. I think that
the situation is really bad,” he added.
Why would the United States “encourage” the Paris-based energy watchdog to overstate how much readily producible oil the world will have over the next 20 years?
After all, American policy-makers have been so smart, open & forthright about everything else! Is it arrogance? Starry-eyed optimism? An abiding faith in the United States Geological
Survey?
I believe it is the continuing futile attempt by Those In Charge to cover their collective ass after 29 years of abject neglect of the oil situation in the United States.
The actual but unofficial oil policy of the United States is the exact opposite of what it should be were this policy designed to serve the Public Good instead of the interests of those holding
power. Move on folks, nothing new to see here.
A healthy dose of skepticism applied to Figure 1 last year might have rendered the whistleblowers’ revelations this year a non-event,
but skepticism, whether it pertains to self-serving Fed statements about the virtues of bubbles in the economy or self-serving CERA statements about long-term peak demand, is always in short
supply.

Figure 1 — The 2008 IEA oil production forecast to 2030. Taken from the Guardian article cited at the top. Annotated to show where we are.
Presumably, the graph shows productive capacity, not actual demand, for oil.
There was a time a few years back when I would have written an extensive, tortuous data-driven analysis demolishing this IEA nonsense. But why bother? It didn’t
do any good then, as I explain below. Why would such an analysis make any difference now? Let’s just examine the graph itself.
Among the chart’s many happy features, I call your attention to these two miracles of bureaucratic forecasting:
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Miracle 1 — accompanying the onset of steep declines in existing production (darker blue), natural gas liquids production takes off just in time to save us,
making up the bulk of the increase from ~86-87 million barrels-per-day now to 105 million in 2030.
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Miracle 2 — outside of gas liquids, non-conventional tar sands production (orange) and a sliver of EOR (black), oil from fields under development (lighter blue)
keeps oil production steady until oil from undiscovered fields (pink) seamlessly takes up the slack.
Here’s another, more dramatic view of the same data from IEA Executive Director Nobuo Tanaka’s presentation to the press on November 10, 2009.
This one’s a real howler!

Figure 2 — Do you see that big light blue portion of the column in 2030? That’s the oil coming from fields yet-to-be-developed or yet-to-be-found.
But perhaps you are looking for an investment? Dollars are cheap! I’ve got some swampland in Florida you may be interested in…
Clearly the IEA’s forecast has been cobbled together to get things to work out just right. The final, Overarching Wonder proclaims an untroubled future in which
the Grand Total rises linearly up to 105 million barrels-per-day, following the same gentle upslope we saw from 1990 to the present in Figure 1. From the Guardian—
Now the “peak oil” theory is gaining support at the heart of the global energy establishment. “The IEA in 2005 was predicting oil supplies could rise as
high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source, who was unwilling to be identified for fear
of reprisals inside the industry. “The 120m figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this.
“Many inside the organization believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears
that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to
oil resources,” he added.
What must be explained away, of course, is how 120 million demand-driven daily barrels became 116 million, and then became 105 million. And why wouldn’t it become
95 or 90 now? Apparently, 103 is where the IEA has drawn the official line (WEO 2009, page 84). On the near side of that line lies the DANGER ZONE. Hence we get these statements by the IEA
whistleblowers cited by the Guardian.
Fears of Panic, Cassandra’s Fate
Outside of American pressure, why does the IEA issue reassuring forecasts? Allow me to quote from an extraordinary piece by the Guardian’s Madeleine
Bunting called Too fearful to publicize peak
oil reality.
It is very hard for the average person in the street to come to a sensible conclusion on peak
oil. It’s a subject that prompts a passionate polarization of views. The peak oilists sometimes sound like those extraordinary Christians
with sandwich boards proclaiming that the end of the world is nigh. In contrast, the the international economic establishment – including the International Energy Authority
(IEA) – has one very clear purpose in mind at all times: don’t panic. Their mission seems to be focused on keeping jittery markets calm…
Faced with these options the majority of people shrug their shoulders in confusion and ignore the trickle of whistleblowers, industry insiders and careful
analysts who have been warning of the imminent decline in oil for over a decade now.
Remember the Queen’s question
– that uncannily accurate and strikingly obvious question she put to economists at the London School of Economics a year ago after the financial crisis:
did no one see it coming? Apply that question to peak oil and the answer is that many people did see it coming but they were marginalized, bullied into silence and
the evidence was buried in the small print.
Yes, we’ve clearly been marginalized, but bullied into silence? No. Marginalizing those sounding the alarm, however, is always sufficient to get the job done if
the overriding concerns are to maintain the status quo, stay upbeat and avoid panic at all costs (even when a fear-based call-to-arms is clearly called for). Panic in the markets would
set off a wave of buying and hoarding, which would lead to resource wars, which would drive the oil price into outer space, which would cause another Great Recession, and so forth.
Bullish opinions fanning the flames of Hope is the only thing we’ve got supporting a strong economic recovery in the United States, in so far as the
fundamentals—household debt, bank solvency, unemployment, foreclosures, etc.—suck. In these times, hopeful optimism is always the key to … something—exactly what escapes me right now. Nasty
surprises later?
Yes, peakists often do sound like Christians on street corners proclaiming the Day of Judgment. This is an understandable but regrettable reaction to
being marginalized, a stance that is often made worse by exaggerated takes on future oil production decline rates.
Views proclaiming the End Times are often based on bogus Hubbert Curves which M. King Hubbert himself almost certainly would not have endorsed, given fluctuations
in demand (like now during the Great Recession) or geopolitical factors (i.e. within OPEC or Russia) affecting production rates. Hubbert curves accurately model transparent, freely
operating oil markets (e.g. in the U.S, the North Sea) but can not capture production rates over time in politically skewed, opaque markets (e.g the Persian Gulf). As usual, a
little knowledge is a dangerous thing.
It is remarkable how many phrases the English language has for those sounding a false alarm: cry wolf, chicken little, doom merchant, prophet of doom,
scaremonger, fearmonger, doomsayer, alarmist, shouter of fire in a crowded theater, and so on. Indeed, erroneous eschatology has a long and glorious history which also includes some
regrettable, premature peak oil prognostications made mostly in the 1990s.
Still, the peak oil argument has been compelling in recent years if one combines 1) a straightforward assessment of production declines versus new oil coming
on-stream with 2) a realpolitik view of the long-term economic interests of the big exporters. The real problem is not that we peakists are wrong, technically or politically speaking. The real
problem is that we live under Cassandra’s curse.
Cassandra in Greek mythology … received the gift of prophecy but was later cursed never to be believed
Cassandra was the daughter of the Trojan king Priam and Hecuba. Apollo, the god of light, who also controlled the fine arts, music and eloquence, granted her
the ability to see the future. But when she didn’t return his love, Apollo condemned her never to be believed. Among other things, Cassandra warned about the Trojan horse
that the Greeks left but her warning was ignored.
[My Note: In modern times, a “Cassandra” has become someone who constantly predicts bad news, which misses the point that Cassandra was always
right too. One important point of the myth is that society can not permit a mere mortal to know the future.]
Cassandra would not succumb to Apollo’s charms. Thus, the simple lesson of Cassandra’s curse is play ball or you’re cast out, you’re marginalized. We
peak-oil-types have never been team players. Refusing to play ball, we were marginalized. The myth expresses a Universal Truth about human group behavior. (My use of the word “group” in that
last sentence is redundant.) In my personal life, I’ve experienced this kind of exile over and over again. It’s not a rockin’ good time, I can tell you.
The venom heaped upon peakers was duplicated in recent years by the scorn heaped upon those who correctly predicted a crash in the global economy. Some of them,
like Nouriel Roubini, are now superstars of the airwaves, so maybe there’s hope for us. (I don’t believe it!)
If past experience is any guide, this Guardian whistleblowers story and Reality will pass each other like two ships in the night, never to meet again.
The release today of the IEA’s World Energy Outlook will garner all the attention, the news cycle will cycle on, and tomorrow the media will move on to something else. Few people have an
attention span longer than a single day anyway.
A Note on Non-OPEC Production
The only new oil result in the IEA’s 2009 WEO was their acknowledgment that growth in non-OPEC oil production is kaput, regardless of any rise in the price.
(Figure 3, with an accompanying quote below).

Figure 3 — The IEA’s Figure 1.9 from page 86 of the 2009 WEO. Past price shocks led to production surges. Not this time.
Non-OPEC conventional production (crude oil and NGLs) is projected to peak around 2010 and then begin to decline slowly through to the end of the projection
period. A continued decline in the number and size of new discoveries is expected to drive up marginal development costs. Production has already peaked in most non-OPEC countries and is
expected to peak in most of the others before 2030 — despite an assumed steady increase in oil prices. Kazakhstan, Azerbaijan and Brazil are the only non-OPEC producing countries to see any
significant increase in output.
Non-OPEC conventional oil production is expected to drop by 330 thousand barrels per day (kb/d) between 2008 and 2011; by contrast, after the first two
oil-price shocks, production surged (Figure 1.9).
The IEA’s non-OPEC forecast out to 2011 is about the same as my own estimate published in Are We in The Post-Peak Era? on February 19,
2009 (Figure 4).
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Figure 4 — My non-OPEC low price/low investment forecast. The gray bar shows my estimate for the Great Recession, which I am sticking with even if GDP is occasionally positive. The IEA’s
numbers includes crude oil, natural gas liquids (NGLs), extra heavy oil from Venezuela and chemical additives. My numbers also include production from the tar sands. The further out you go, the
fuzzier things get. Perhaps the decline will not be so steep after 2012 as the IEA believes.
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