Report warns oil production has already peaked

World oil production has already peaked and a supply gap is now inevitable over the next two decades, resulting in soaring oil prices and potentially catastrophic social and economic unrest.

That is the view of a major new report released today by the Energy Watch Group (EWG), which claims that world oil production peaked in 2006 and production will now decline at a rate of several per cent a year.

The apocalyptic predictions are in sharp contrast to projections from the International Energy Agency, which maintains that supplies are secure for the foreseeable future.

However, the EWG report argues that its estimates are primarily based on oil production data rather than reserve data, which it claims has proved notoriously unreliable in the past. Using its methodology, the EWA estimates world oil reserves stand at 854 Giga barrel (Gb), almost a third less than official oil industry estimates.

The report further predicts that oil production will plummet from current levels of 81 million barrels a day to just 39 million barrels a day by 2030 and that a knock-on increase in demand for other fuels such as gas, coal and uranium will lead to similar shortages in these fields. It warns that such shortfalls would lead to soaring energy prices and increased social tensions and conflicts, such as those seen in Burma last month.

Hans-Josef Fell, founder of EWG and a German MP, said that a refusal to face up to the reality of peak oil had hampered any attempts to develop alternative energy sources.

"The message by the IEA, namely that business as usual will also be possible in future, sends a diffusing signal to the markets and blocks investments in already available renewable energy technologies," he warned.

His comments were endorsed by Jeremy Leggett, CEO of Solarcentury and former member of the UK government’s Renewables Advisory Board, who complained that the government and the oil industry were guilty of institutionalised denial about the threat posed by peak oil and soaring oil prices.

"As the evidence of an early peak in production unfolds, this becomes increasingly impossible to understand," he added.

Report author Jörg Schindler warned that the projected oil supply gap would be too big for any shortfall to be made up by other fossil fuels, nuclear, or renewable energy and advised that a global shift in energy policy was urgently required to limit the impact of oil shortages over the next two decades.

"Since crude oil is the most important energy carrier at a global scale and since all kinds of transport rely heavily on oil, the future oil availability is of paramount importance as it entails completely different actions by politics, business and individuals," he observed.

The report provides further ammunition to environmentalists and economists who have long argued that peak oil provides an explicit economic case for developing low carbon business models as early as possible, as a means of mitigating the risk of both runaway climate change and soaring energy prices.