Peak oil looms

As 2009 ended, a report issued by the International Energy Agency (IEA) received scant media attention, but it has huge implications for future U.S. economic growth and national security.

Faith Birol, chief economist for the IEA, announced that unless there are major new oil discoveries, something his agency does not expect, the output of conventional oil production will peak in 2020. The agency’s official conclusion is that production will reach a plateau sometime before 2030.

The news was startling from an agency that had previously refused to predict when oil supplies might stop growing. In fact, the IEA, closely watched by the world energy markets as an objective analytical source, had previously downplayed the prospects that oil production was reaching a peak.

The problem, of course, is that oil demand will keep growing. While the worldwide recession temporarily stalled energy demand, dramatic growth in India and China (now the leading purchaser of motor vehicles) and other emerging markets will ramp up consumption. As demand outstrips production, serious problems will begin – price spikes, shortages and potential international conflicts as nations jockey for access to oil.

The Day (Connecticut)