In the absence of new investment to increase oil production, oil output is set to decrease by 9.1% per annum. This is the conclusion of a report by the International Energy Agency. Now this is staggering. I have mentioned that figures of a 2 -3% decline following peak oil have been proposed before, but this is a real plummet off the peak. As a rule of thumb, a decline of 2% means painful adaptation, a 5% fall signifies very painful adjustments and 10% portends wholesale societal disintegration. The report suggests that due to steep declines in existing oil fields, mainly in the North Sea (as I noted earlier this week), Russia and Alaska, it will prove difficult to keep up with rising demand for oil. Thus, this is a projection more of the demand-supply gap for oil which relentless demand will inaugurate irrespective of whether oil peaks just yet, but when it does the situation will hardly be helped.
The recent fall in oil prices, in consequence of the credit crunch, has put the brakes on various development projects which does not help the prognosis for a sick oil world. It is noteworthy that the IEA also have a dig at peak oil enthusiasts, claiming that they say the world is running out of oil, and that this is wrong. Of course it is wrong and that is not what believers in peak oil are saying at all or have ever said. However, it is clear that the report's conclusion of a 9% fall in production does mean peak oil in all practical terms whether the Hubbert peak is followed explicitly or not.
The IEA emphasise the position that with sufficient investment in new small fields and exploitation of tar sands "oil", it will be possible to actually increase production. Saliently, it is precisely this kind of investment in new tar sands projects in Athabasca that has been hit by the falling price of oil, i.e. the incentive to produce it just now is far less than in the summer when a barrel of conventional crude bore a price-tag of nearly $150. Such investment will prove expensive, will not be able to keep the end up for overall production v. demand for more than a few years, and inevitably oil will become not just a more expensive but rarer commodity in future, whatever happens.
The blow of a 9% decrease would hit very hard indeed, and leave us all with no time to bring on or even devise much in the way of Plan B's. 9% is something like 7 million barrels a day of oil, and to put that into context the output from the whole of Saudi Arabia is about 10 million barrels daily, so that is what the IEA thinks will be wiped off the world oil balance sheet every year, over a timescale that is not worth considering for more than a couple of years because by then the oil-dependent, civilized world will have collapsed.
"Nine Percent", By Richard Heinberg: http://postcarbon.org/nine_percent
"World will struggle to meet oil demand," By Carola Hoyos and Javier Bias. http://ft.onet.pl/0,16479,world_will_struggle_to_meet_oil_demand,artykul_ft.html