The upcoming oil shortage: part three

From the 21 December 2009 Greater Niagara Newspapers

THE UPCOMING OIL SHORTAGE: PART THREE
By Bob Confer

Americans have been led to believe that the supply of oil is nearly limitless and for the next half century we will have more than enough crude to meet the growing needs of the global economy. The Republican Party’s national platform touts the availability of untapped reserves in Alaska and along our shores while the party currently in charge (the Democrats) seems genuinely unconcerned with future supplies.

But, as we go about our lives, guzzling gas at amazing rates and taking its presence for granted, the rest of the world is concerned about the long-term prospects for oil as the world’s preeminent energy source. Along those lines, in early November the United Kingdom newspaper, the Guardian, dropped a bombshell, quoting two unnamed oil industry executives who said that the International Energy Agency was willingly overstating oil supplies.

The IEA has, in recent years, said that oil production will rise from its current level of 83 million barrels per day to 105 million barrels per day by 2030, a growth of 27 percent. The whistleblowers said that many within the IEA know that this is impossible and maintaining oil supplies at even 90 to 95 million barrels per day is not achievable. They noted that back in 2005 the IEA was openly saying that 120 million barrels per day by 2030 was realistic but has since then tempered those proclamations to 105 million, an indicator of considerable disagreement within the organization. The whistleblowers said that some key IEA personnel believe that the oil peak is upon us, signaling certain disaster for sustainable economic growth.

That news caught the attention of the rest of the world but went almost unmentioned by the mainstream media in North America. That may be because it wasn’t sexy enough amongst other timely issues like health care or global warming or it may have been the fact that the report painted the US in an unfavorable light. The IEA sources said that senior officials have downplayed the rate of decline in oil reserves while overplaying the potential for new reserves because the US government and Wall Street have exerted considerable pressure on the organization because they did not want a more truthful report to trigger a buying panic that would cause a sudden spike in gasoline prices in turn tempering our nation’s recovery from the Great Recession.

If that’s true – which it very much could be - it’s a very poor way by which to manage a nation: The long-term health of our economy has been abandoned for short-term benefit. That’s a poor economic model that sets the stage for considerable, almost unfathomable, struggles by Generations X and Y and today’s youth when they encounter this disaster unprepared.

Although the fears for an oil shortage may be old hat to the rest of the world (this is not the first time that the concept of Peak Oil has reared its head in a trusted international news outlet) it remains as an underreported, almost conspiratorial, theory in the States. Fortunately, more voices are speaking up on the issue in the US, including the smart money. One of the more trusted names in personal investing, Raymond James, has noted the impending oil shortage. The company’s director of energy research Marshall Adkins was recently quoted as saying that the peak occurred in 2008 and, sometime in the next decade, $6 to $8 gasoline will be the norm. Tom Petrie, vice-chairman of Bank of America Merrill Lynch, agrees, saying that we have already hit Peak Oil and we are in a terminal decline of supply at the same time demand is on the rise courtesy of China who, by 2030, will account for 43% of demand (It should be noted that China clearly understands the reality of the oil shortage. They are aggressively buying up reserves and foreign assets while at the same time developing new technologies).

We can only hope that in 2010 we see more news outlets covering the reality of oil’s future. Then and only then, after being educated on an issue of grave importance, will our elected officials and businessmen develop the sense of urgency necessary to quickly address our untapped reserves and develop alternative energy sources, ensuring the economic vibrancy of future generations of Americans.