Posted by: senjmito | June 6, 2011

International Energy Agency: The Age Of Cheap Oil Is Over

One of the world’s top energy officials has issued a stark warning that’s rippled through global oil markets. Fatih Birol, the chief economist at the International Energy Agency, says the age of cheap oil is over and high prices are here to stay.

Fatih Birol talked to National Radio’s Kathryn Ryan on 25 May 2011, and you can listen to the interview here:

Patrick Morgan made the following notes on the talk – notes that are well worth reading. Point your favourite local transport planner to those links above – even better, persuade Steven Joyce to listen!

Key points

  • Era of cheap oil is over, for ever
  • Learn to live with higher prices
  • This is a major risk to global economy


  • peak oil is a reality
  • peak production of conventional oil was 2006
  • high prices are here to stay

High prices are caused by:

  1. strong demand from China and developing countries, esp
    transport sector…
  2. while production has some ‘challenges’. Production is
    declining in many countries, few alternatives to Middle East oil
  3. unrest in Middle East / Africa creates uncertainty.

Other points Fatih Birol made during the discussion

Production could be increased if producing countries decide to.
Seasonal demand expected in next few months, driving season
in US
China had a dry year so less hydro-electric generation and
more from fossil fuel

Era of cheap oil is over, for ever
Learn to live with higher prices
global economy vulnerable since the financial crisis
unconventional sources can take up the slack e.g. Natural
gas, Venezuela, Canada can add 10m b/d
Will Middle East decide to increase production?
4 new Saudi Arabias needed to meet projected growth in
demand. A tall order.
How can we move from an oil-based economy?
We need to start now.
Ryan: Why did IEA dis peak oil as recently as 2008?
Birol claimed IEA was the first to make a study of
production decline.
Many govts taking oil security seriously e.g China, US,
European countries
90% of growth comes from cars, trucks, jets.
1. Use these more efficiently. A major issue.
2. China: electric cars, could reduce oil dependence
3. use biofuels
Oil dependence is our Achilles heel.
High prices hurt economic recovery.
Sub-Saharan Africa is affected the most.
Will lead to new frictions between nations.
OPEC meets is 2 weeks.
Oil prices could come down if producers tell the markets
they will increase production.
US govt could release stockpiles to reduce pressure on
Forecasts 98m b/d by 2035, mainly from Iraq, Saudi and



  1. We suggest that a stock take of oil supplies worldwide is paramount as it has been reported China in fact is sitting on its own oil fields draining others in far away countries. Oil is not just a commodity, it is power and in this case the one who laughs last laughs best……

  2. I am amazed that Canadian oil sands are still looked on as an area for future growth, when the constraints on increasing production are huge – massive pollution and destruction of local environment, insufficient water, insufficient gas to heat the water etc.

  3. Alan Preston here in Mangawhai , Northland.
    ( for Save Our Rail Northland et al )

    I have just received an e-mail from the Acting Minister of Energy providing a response ( see below ) to an e-mail “Peak Oil: What is your plan?” which I sent out to ‘All Ministers in the National Government’ on the 25th of May 2011 ( see below )
    I’ve also sent this out to groups working to protect their regional railways from closure and from having roads of ‘National’ significance
    bulldozed through their communities, to other transport/energy related groups – and to media and opposition MPs.

    I’ve just had another listen to and re-read the interviews with Fatih Birol, the Chief Economist at the International Energy Agency
    and am not convinced that the Minister, by her statement that ” new fields and unconventional sources will ensure that demand continues to be met. is acknowledging’ Fatih Birol’s assertion that : ” On the one hand we have this pressure on the demand side, but when we look at the production side the prospects are a little bleak. We think that the crude oil production has already peaked in 2006, but we expect oil to come from the natural gas liquids, the type of liquid we have through the production of gas, and also a bit from the oil sands. But in any case it will be very challenging to see an increase in the production to meet the growth in the demand, and as a result of that one of the major conclusions we have from our recent work in the energy outlook is that the age of cheap oil is over. We all have to prepare ourselves, as governments, as industry, or as a private car driver, for higher oil prices.
    In the next 25 years we have to find and develop four new Saudi Arabias.”

    In accordance with what the Chief Economist of the International Energy Agency is saying , New Zealand needs to be refocusing spending away from fossil fuel dependent/vulnerable roading projects ( esp. those of ‘National’ significance) and into maintaining and developing our regional railways and infrastructures that enable and encourage other forms of sustainable & active modes of transport.

    This latest advice from the IEA has serious implications for New Zealand but our news media and elected representatives are continuing to downplay, disregard or ignore it.
    Raising general awareness of this latest admission/advice from the IEA and getting our political leaders to acknowledge it may encourage a more proactive approach to achieving the establishment of a more sustainable, efficient and resilient transport system.

    A nationwide ‘day of National Significance’ is being held on the 6th of July 2011 in support of the Save Kapiti group who will be marching on Parliament
    25th of May 2011: To all Ministers in the National Government: Peak Oil: What is your plan ?
    Dear Minister(s)
    We are a broad network of people around New Zealand who are concerned about the ‘road’ we are being taken down.
    We would like to know if you have seen / heard / read / understand the issue addressed on the following web-page:
    and would like to know why you are not acting collectively to address what is likely to be the most important issue to face our nation.
    We would like to collate and publish your responses.

    Thank you.
    Alan Preston.

    Here is the (acting) Minister of Energy’s Response :

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