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From Salon.com I understood that the IEA report still downplays the threat of peak oil. Here is their first (and the only?) mention of "peak oil" on page 30 (out of 82):

The concept of peak oil production and its timing are emotive subjects which raise intense debate. Much rests on the definition of which segment of global oil production is deemed to be at or approaching peak. Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak...

    While there might be a temptation to extrapolate this trend, citing a peak in conventional oil output, a degree of caution is in order. Firstly, the concept of "conventional" oil changes with time, technology and economics. In the early 1970s, much offshore production was deemed unconventional, but this portion of global supply has since grown to account for 30 percent of the total. Evolving economies of scale and infrastructure development could do the same for [gas-to-liquid], oil sands and ultra-deepwater reserves in the future, shifting today's unconventional resource into tomorrow's conventional supply category...

    Finally, we note that focusing on non-OPEC crude alone is a rather selective way of considering the sustainability of global oil production. Peak or plateau production is frequently taken as shorthand for impending resource exhaustion. While hydrocarbon resources are finite, nonetheless issues of access to reserves, prevailing investment regime and availability of upstream infrastructure and capital seem greater barriers to medium-term growth than limits to the resource base itself.

Here is how Salon.com's Andrew Leonard interprets that:

To drastically summarize the report: The problem is not that the world is running out of oil, but that right now, offshore oil rigs are scarce and expensive, skilled labor is tight, transport infrastructure is limited, and political considerations such as "resource nationalism" in states such as Venezuela and Russia and geopolitical risk in Iran and Nigeria are hampering investment and development. Logistics are the real problem, the report seems to be saying, and not the actual amount of oil in the ground. This leads to the conclusion that even though nearly 3 million barrels of new supply will be needed each year just to offset the decline in established oil fields, "above-ground supply risks are seen exceeding below-ground risks in the medium term."

But there's a problem with this formulation that demonstrates a very careful, if not disingenuous, attempt to skirt the troubling implication of "peak oil." Peak oil does not mean, as has been emphasized a thousand times before, here and elsewhere, that "the world is running out of oil." It means that "the world is running out of cheap oil."

And that interpretation seems to be completely justified by the IEA report. Take, for instance, BP's much delayed "Thunder Horse" Gulf of Mexico offshore oil project. The IEA report notes that the project has faced a "perfect storm" of problems, including technical issues related to the new challenges of ultra-deepwater oil drilling, hurricanes and more mundane bumps in the road. Then the report notes that "Other projects may not face the same litany of problems as Thunder Horse, but as incremental non-OPEC supply becomes increasingly concentrated in technologically challenging areas, so cost over-runs and delays will remain part of the industrial landscape."

That's the most important sentence in the report. New supply is going to be harder to get, posing greater technological challenges and requiring higher levels of investment.

And yeah, the same salon.com introduces some peak oil computer games. Wanna play?

by das monde on Tue Jul 10th, 2007 at 12:58:53 PM EST

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