## IEA says oil supplies may not keep up with demand

##### 15 November 2014

by Nick Cunningham of Oilprice.com

Despite what appears to be a saturated oil market in 2014, oil producers around the world will struggle to meet rising demand over the next few decades. In its latest annual World Energy Outlook, the International Energy Agency (IEA) warned that the current period of oil abundance may be fleeting, and in fact, without heroic levels of production increases, oil markets will grow dangerously tight in the coming years.

Global oil demand is expected to increase by 37 percent by 2040, with a dominant proportion of that coming from developing countries—i.e. China and India. In fact, the IEA says that for every barrel of oil the industrialized world expects to eliminate from demand through efficiency or other ways of reducing demand, developing countries will burn through two additional barrels.

The IEA predicts that the world will need to extract an additional 14 million barrels of oil per day (bpd) by 2040, which comes on top of today’s production levels of about 90 million bpd. While there is a lot of triumphalism in the United States about shale oil production and how places like the Bakken and the Eagle Ford have ushered in an era of abundance, the IEA says that tight oil production in the US—along with Canadian oil sands—will only last until the mid-2020s.

After that point, when the shale revolution peters out, oil markets revert to their old ways—that is, looking to the Middle East once again to meet global demand. And that should raise some alarm. Saudi Arabia will remain one of the largest and most important oil producers in the world, but it probably won’t be able to ramp up production much beyond its current levels. There is some slack production in Iran, due to western sanctions, but even when it returns to the fold it likely will only make a small contribution to oil production growth in the long-term.

Instead, much of the world’s hopes are pinned disproportionately on Iraq. A year ago, after the IEA released its 2013 WEO, I wrote about how the IEA was placing a surprising amount of faith in the ability of Iraq to scale up its oil production. For several years, the IEA predicted that Iraq would be able to triple its output from 3 million bpd to around 8.3 million bpd by 2035. Under that assumption, oil prices would rise only a modest amount over that timeframe.

That would have been a monumental task even before the country began unraveling in June 2014. Since then, Iraq has been plunged back into a state of war. The prospect that it can be put back together, and the requisite levels of capital investment can be put into its oil sector in order to add 5-6 million bpd over the next 20-30 years, appears fanciful to say the least.

An estimated $900 billion will need to be deployed each year beginning in the 2030s to bring enough oil online to meet global demand. But the IEA also cautions that replicating the tight oil boom in the United States will be very difficult. Different geological conditions could pose some problems, but the long lead times and opposition to drilling will also slow development in much of the world. Unlike last year, this time around the IEA appears to be more concerned. “A well-supplied oil market in the short-term should not disguise the challenges that lie ahead, as the world is set to rely more heavily on a relatively small number of producing countries,” the IEA Chief Economist Fatih Birol, said in a press release. And in its WEO Fact sheet, the IEA declares “the task of bringing production above 100 mb/d rests on a fairly limited number of shoulders.” ### Comments "increase by 37 percent by 2040" 90 mbpd plus 37% equals 123.3 mbpd, which is larger than the 14 mbpd they stated. The take away message is that at some point the world will have to produce more than 100 mbpd and probably will not be able to do that. I leave it to your imaginations to formulate what will come from that demand FAR exceeding any possible supply. History has shown that it may not be a good scenario. We already know that it is a lost battle, oil production can remains flat at current level, but past 2020 / 2025 it can only go down when demand can only goes up particularly in developing country...let's hope that we are not stupid sitting comfortably on our oil shale bubble that is only a blip. Time to be creative to get out of oil addiction, now that the fake promise of biofuels (except for aircraft) has dissipated we can focus on the only real alternative on the short term : BEV... Natural gaz can help but it can only be a transition, so why get distracted. H2 to me is only a long term solution, not for the 1st half of this century, too costly and too complicated. By the way oil won't be the only commodity in short supply in 2040. Water will ne another one in so many places in the world as it is now in California. We have to stop to take abundance for granted, we are headed to 11 billions people at the end of this century while we are powered by unsustainable energies and environmental taxation. Let it be...Amen ! A possible future: widespread, low-cost Gen IV nuclear -> low-carbon power + synthetic fuels + desalination -> prosperity for the developing world -> stabilized population growth + stabilized climate * Energy is abundant * Water is abundant * Vision and enlightened leadership are in short supply, but hope springs eternal. desalination is too costly for anything else than domestic use of water, 80% of water use is for agriculture, en desalination is not an option for this.The problem is food production that requires more water and more land which has an unsustainable environmental cost, and as we phase out fossil energy we will have to use also land to make fibers and plastic and rubber and synthetic fuel that so far are made from oil. To me the 1st thing to do to get slack is to stop eating so much meat, we would almost reduce our land need by a factor 2 (and our CO2 emissions to feed us as well) but it is exactly the opposite that is happening, as country develops they eat more meat just as they use more cars...I am afraid that humanity will only come to reasonable and responsible behavior when problems and nature backfire big time Amazes me that we have the answer available to all these problems, yet, our capitalistic profit system, driven by a political system controlled by five Oil Companies, slows the necessary innovation to a crawl. Hydrocarbon fuel and IC engines are obsolete technologies and will someday be replaced by renewables and EVs. However, the transition will be painfully slow as current interests fight to maintain the status quo, regardless of the damages to the land, air and human health. We can make real progress when the rich oil companies decide to quite the status quo fight and invest in the new energy technologies. Lad, especially true when people votes for a Congress and a Senate that is under control of the Koch bothers...like the don't have enough of it...sad The majority is reactive and will not react before the problems are visible and affecting them. Look at what is happening with air pollution in China, India, Indonesia, Malaysia and many other places. People have to get tired of wearing air-masks before they will do something positive to fix the problem. The same thing happened in California, London, Tokyo 10+ years ago. We (the majority) will stop burning coal, oil products, NG, bio-fuels, wood etc when the pollution level affects our health and makes our life miserable. HarveyD yes you are absolutely right, and the last political move of america is here to illustrate your point, we are in denial. So we have to wait problems backfire badly enough to take action. The only problem is that when it comes to climate change, it will be too late to change only when we feel the pain, the inertia is just too much to turn the boat... The effects of pollution, GHG and climate changes will have to be taught in schools (starting in kinder gardens) to be better understood by the majority. GOP parents will learn from their children. yes I am afraid GOP parents are a lost generation, totally hopeless at this point.... Lad and all, Molten salt fast breeders, bio synthetic fuels and other remedies will not get funded. The easier money is where it has been for more than 100 years...oil. Major oil companies may not be convincing investment banks not to invest in alternatives, they don't have to. They make plenty of money speculation on oil futures. No. The time period after the mid 20s will be characterized by falling oil demand due to the electrical transportation revolution. The shale boom came in a timely fashion to fill out the gap, if more is needed, A shale boom can develop in other places, plus we are entering the second stage of the biofuels revolution. You are no Seer, what you think is vision is actually a hallucination. Yes Petroleum will not keep up with future demand. However, synthetic fuels from waste biomass pyrolysis with hydrogenation with renewable H2 will fill the gap at prices competitive with future petroleum. And then, there will be H2 and battery electricity to further fill up the gap completely. Due to the significantly higher production cost of EV's, future synthetic liquid fuels for ICEV's and HEV's may well be the most popular option due to the least purchasing cost. Hybrid Combustion Fuel Cell EV's (HCFCEV) may have a fighting chance against HEV's and ICEV's because the future lower cost per mile of H2 and grid electricity vs hydrocarbon liquid fuels may make up for the higher purchasing cost of HCFCEV's vs the lower cost of ICEV's. HCFCEV's are vehicles in which 1/2 of the power comes from FC, battery, and e-motor, while the other half of power comes from Hydrogen-combustion engine, in order to reduce the production cost. Likewise, those who don't mind plugging-in daily will opt for PHEV's, with purchasing prices comparable or slightly lower than that of above HCFCEV's. However , a mid-life battery pack change will even out the overall life-time costs of PHEV's vs HCFCEV's. Pure EV's such as BEV's or FCEV's will be much more expensive than all above options of ICEV and Hybrid options that they will probably remain a niche market for the BEV purists or FCEV purists. @Nick Lyons, When Santa brings you all those wishes this year, could you tell him to add in a unicorn for me? I really want it to be purple too. Be a dear and put in a good word for me??? @DaveD: My 'wishes' are all completely feasible. I don't say they will happen; I say they can happen. As I said above, imagination/vision of what is possible is in short supply, and I certainly don't know when humanity will figure this all out, or what new tragedies may befall us before we do. I remain hopeful that we will figure out how to build a more humane, sustainable world some day. Have to agree with Nick. Leadership is the problem, not imagination or resources. The Chicken Little flock has been mis-predicting the carrying capacity of earth since the middle ages. Trying to predict a dynamic system with essentially static assumptions has never worked. Faced with necessity people will be very inventive. Those adaptations, see shale oil, are not predictable. By the way does anyone have a reason shale oil will not be found world wide? I read here this summer of huge shale play starting in Venezuela. Many solution paths exist, some work here some there. Adjustments are constantly required for success in life, one size does not fit all. The market will work just fine for people to figure out if they prioritize meat eating or not, (just like it has done for centuries). Choice is a beautiful thing. Resources & solutions will tend to flow accordingly, to best serve the most people. Paths where regulators, politicians, NIMBY’s, Watermelon’s, etc choke off & cloud solutions, see US nuclear power, are the problem. Command economy can never yield the richness of choices and solutions but totalitarianism can show what real costs are without the above cancer. Chinese nuclear is ~half the cost of US. Gives us something to shoot for.  Big oil may control politicians, but politicians have less control over the economy and business than everyone (especially politicians) would like us to believe. GE is betting on distributed energy. India is working on solar and wind, as is Iran. The interests of businesses other than oil are to have stable, sustainable energy sources. This report and others like it will just accelerate the effort toward other sources. I have no idea how this will all shake out, but it will shake out - probably not smoothly, but also probably not how 99% of us predict. There are no rewards (yet) for the production of clean electricity, goods and services. Meanwhile, most private industries will keep on producing the lowest cost electricity, goods and services regardless of the pollution created and as long as profits come in. This is why we offset with incentives. The world subsidizes coal and oil more than$100 billion per year with tax breaks and depletion allowances. Reduce subsidies for coal and oil and use that to produce incentives for wind, solar and bio refineries. Over time, business will realize where the profits are.

Roger-Pham

Sorry but I disagree on the bright future of synthetic fuels made from biomass, we just don't have the land to dedicate to bio-fuel production, we are not even sure we have enough land to feed the world 30 years from now, when global warming will start to pick up big time and that fossil energy will decline. Synthetic fuel will only be a viable option for aircraft. Biomass will be used at best to make plastic and fibers. I was a big proponent of bio-fuel but after 10 years of reading about the pros and cons, the conclusions is that it is just not a good idea. BEV is way better option and the reason is that the well to wheel efficiency is the best of all approach and by a large account, asides it clean, not noisy, simplify vehicle design and manufacturing, regenerative breaking, little maintenance, you can't be all that. Batteries are the weak part but they will improve

Tree,

I don't know about the world, but the U.S. has more than 400 million acres in production and another 100 million that can be put into production.

Using the starch in corn grain and sorghum makes ethanol while it still makes distillers grain feed for livestock minus the starch which is healthier for the animals. Now you can take the corn and sorghum stalks to make cellulose ethanol then you gasify the lignin that remains to make bio synthetic "drop in" fuels like green gasoline.

Using those methods and double cropping sorghum you can get 1000 gallons of fuel per acre. Using 100 million of the 500 million acres we can make 100 billion gallons of fuel, more than enough for half the transportation fuel with NO extra land NOR extra water. Keep in mind you are still making feed for the livestock, healthier feed.

I have pointed out these facts many times here, no one can dispute them because they are facts. The Department of Energy supports these facts, the Department of Agriculture supports these facts. People can believe what they want, fact free or not.

Good point, SJC.
@tree,
Furthermore, the cost of solar and wind energy is getting lower and lower as these energy collectors will continue to produce power long after they are paid for, so future hydrogen from these will be cheap, so these renewable hydrogen can be added to the biomass during the pyrolysis step to double the hydrocarbon fuel yield for a given amount of waste biomass.

The cellulose as carbohydrate is partially oxidized. When hydrogen is added to remove the oxygen out of carbohydrate to turn it into hydrocarbon, the energy yield of the fuel will be much increase.

I see only hope from this report. We want to stop using fossil fuels and there are a variety of ways to achieve them. My personal bet is that BEV's will be the way of the future since we "only" need to solve the battery price problem. Even that is not really a problem, it's just that we've got used to a certain level of utility from cheap gasoline. Where I live gasoline costs around $1.50 per litre. If that goes up to$4.00 per litre (over \$300 per barrel of oil) it will be worth my while to buy a current generation LEAF. Not that I think that will happen. I had no idea about shale oil even 4 years ago. Humans are inventive and there is a huge amount of money to be made if fossil fuels substantially increase in price. BEV, PHEV, bio-fuels, unconventional oil, nat gas, hydrogen etc...

Actually my bet would be unconventional fossil fuels. There is plenty of oil in shales around the world even if they're more expensive than US shale. Anyway this is why this website is so interesting. We watch as the world makes it's transition from conventional oil deposits.

I was about to respond to some of the less rational posts above but to save time I will just agree with msevior and ...

AND point out that the IEA says"
“By 2040, world energy supply is divided into four almost equal parts: low-carbon sources (nuclear and renewables), oil, natural gas and coal”.

They are saying that nuclear and renewables will be about 12% each.
And oil, natural gas and coal will EACH be 25%.

After 25 more years.

And;
Making money for stockholders is the MAIN (and moral) duty of most companies/corporations. Among the ways they do this is maintaining good will; the populace as a whole wants cheap gas. Finding and producing more oil makes cheap gas AND makes more money - so the obvious, common sense answer is to find and produce more oil. If this is not done morally they will lose good will.

And;
You may dislike low gas prices and the “the status quo fight” but in a democracy, if the people think THEY are right and you are wrong, effectively and morally, you ARE wrong.

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