IEA Economist Concerned About Peak Oil: Dan Amoss / July 3, 2007

Last week, French newspaper Le Monde ran a shocking interview with Fatih Birol, chief economist of the International Energy Agency. Birol speaks candidly about the challenges imposed by Peak Oil -- a break from the norm for an IEA official. “If Iraqi production does not rise exponentially by 2015, we have a very big problem, even if Saudi Arabia fulfills all its promises,” says Birol. “The numbers are very simple, there’s no need to be an expert.” Needless to say, very few experts would think that an “exponential” rise in Iraqi oil production is within the realm of possibility over the next eight years.

As for Saudi Arabia, Birol has some harsh words: “I understand the Saudi government claims 230 billion barrels of reserves, and I have no official reason not to believe these numbers. Nevertheless, Saudi Arabia -- as well as other producing countries and oil companies -- should be more transparent in their numbers. Oil is a crucial good for all of us and we have the right to know how much oil, as per international standards, is left.”

Not only does Saudi Arabia publish questionable reserve numbers, but they also fail to mention the fact that most of what they have left is heavy, sour crude that hardly anybody wants. The Saudi Oil minister has claimed over the past year that they have a few million barrels per day of so-called spare production capacity, yet they can’t find buyers for all their crude. Should this heavy, sour crude really be included in capacity if it’s impractical to refine? Perhaps this is why the Saudis are investing heavily in refineries. This trend has big financial implications for consumers of refined products like gasoline. — Dan Amoss

• View all of the Economics & Politics Quick Takes >>