Friday, November 13, 2009

Tell Me Lies...Tell Me Sweet Little Lies

In a news item that was (unsurprisingly) largely ignored by US media outlets, it was revealed this week that the statistics on global oil reserves put together by the International Energy Agency(IEA) have been "fudged" for years. The IEA is considered to be a very highly-respected agency and they were thought to be THE source for information on the oil markets.

The UK's Guardian newspaper spoke to two whistleblowers at the IEA and what a story they told - According to the whistleblowers, the world is much closer to running out of relatively cheap and accessible oil than what the agency's numbers show.

The agency publicly maintains that oil supplies are plentiful and that production can "easily" be ramped up from the current 83 million barrels of oil per day to 105 million barrels.

Skeptics outside the agency doubt whether even 90 million barrels of oil per day can be acheived due to many major oil fields, such as in Mexico, being in a state of rapid decline. The skeptics expect global oil production to actually begin declining with the next 5-10 years.

And the skeptics may have a point...for example, the IEA is taking Saudi Arabia at its word about its oil reserves. The Saudi reserve numbers have remained constant for many years even though obviously the Saudis have been pumping lots of oil out of the ground for all those many years. Perhaps more telling is the fact that the Saudis have not permitted an independent verification of the Saudis' oil reserves literally for decades.

But why would the IEA risk ruining its reputation and "fudge" their numbers?

According to the whistleblowers, "the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves."

And the whistleblowers go on to say the imperative at the agency "was not to anger the Americans". After all, the US doesn't want Wall Street to lose money in a stock market decline.....

The whistleblowers said, "Many inside the organization believe that maintaining oil supplies at even 90-95 million barrels a day would be IMPOSSIBLE." This is not good news in the light of the rapidly increasing demand for oil coming from the emerging markets. No wonder China has snapped up every oil field they could in recent years...

The whistleblowers went on, "There are fears that panic could spread on the financial markets if the figures were brought down further." And no one wants a financial panic...but won't there be one if we wake up one day and oil is trading at $500 a barrel?

It's just another case of past and current American governments "kicking the can down the road"...hoping a miracle will happen before the country has to face harsh reality.

1 comment:

  1. If you are looking for a lier look no further than wall street.

    ReplyDelete