INTERNATIONAL. The world will see oil production peak in 2020, about a decade earlier than most official government predictions, a leading IEA energy economist has warned.
In an interview with UK newspaper The Independent, Dr Fatih Birol, the chief economist at the International Energy Agency (IEA) in Paris said 'the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted'.
"One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day," Dr Birol said.
"The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously," he said.
Dr Birol added that "the market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40% share of the oil market and this will increase much more strongly in the future".
He warned that we are heading toward a 'catastophic energy crunch that could cripple a global economic recovery'.
A peak in production doesn't mean that oil has run out at that time. However it implies an imbalance between higher demand that cannot be met by higher output. And this could lead to a drastic spike in the price of oil.
"If we see a tightness of the markets, people in the street will see it in terms of higher prices, much higher than we see now. It will have an impact on the economy, definitely, especially if we see this tightness in the markets in the next few years," Dr Birol said.
Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course.
"It will be especially important because the global economy will still be very fragile, very vulnerable. Many people think there will be a recovery in a few years' time but it will be a slow recovery and a fragile recovery and we will have the risk that the recovery will be strangled with higher oil prices," he told The Independent.
Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030, Dr Birol said.
Peak oil has been the subject of debate for many years and has largely been ignored by industry optimists but has continually worried many industry experts.
Investor Jim Rogers is bullish on oil as the world is running out of known oil reserves.
Rogers, who remains bullish on commodities, estimated, earlier this year, known world oil reserves at today's consumption rate are about 16 years, which indicates crude prices will again trend higher.
"Oil reserves are dropping 7% a year and these drop in reserves will cause serious supply problems in the near future."
"We're going to see US$200 oil at some point, it may be by 2013. It's a sad fact but the world is running out of known oil. Oil will make a big comeback," he said.
Experts backing peak oil theories, such as Matthew Simmons of Simmons and Co, have warned that sharp global declines could happen at any time, and that under best case scenarios, Saudi Arabia will be able to keep production flat for several years but not increase output to keep up with growing demand.
Critics of peak-oil assertions say it's impossible to know when petroleum production has peaked, given uncertainties estimating global reserves, and point out that previous theories pegging a specific date for peak oil output have been wrong.
The real issue is not whether oil production has already peaked as nobody really knows whether all geological options have been exhausted," says a report from Strategy Garden, the consulting division of the publishers of Business Intelligence Middle East.
"The main point seems to be more political, or 'surface' based, rather than geological. In other words is there enough oil on planet earth, either discovered, unexploited or yet undiscovered, to satisfy forseeable demand? " asks the report.
"If the answer is negative, then Peak oil is no longer a theory and the world has to get used, fast, to coping, including changing acquired lifestyle habits, with life after oil runs out," says the Strategy Garden report.
The theory of peak oil was first suggested by geoscientist Marion King Hubbert, who in 1956 predicted US oil production would peak between 1965 and 1970.
Figures from the US government Energy Information Administration show crude oil production peaked in the United States in 1970.
The Hubbert peak curve is a bell-shaped model of production for a particular country, region or the world, given an assumed total recoverable volume.