In an interview with The Independent, chief economist of the International Energy Agency (IEA), Dr Fatih Birol, warns that global economic recovery is under threat due to peak production having being reached in most major oil fields. Increasing demand for oil, in parallel with declining supplies, has the potential to cause an ‘oil crunch’. IEA estimates, projected in 2007, that oil production would decline annually by 3.7% have now been revised upwards to 6.7%. Birol is quick to point out the wider ramifications of oil shortfalls:
The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future.
One day, Birol claims, we will run out of oil completely. This will have a devastating effect on a world economy so reliant on it for energy, agriculture and food.
It’s not all doom and gloom though. In an op-ed for The Independent, Jeremy Leggett, a former geology consultant to the oil industry, claims that there is one considerable difference between the impending energy crisis and the current financial crisis:
Few people and organisations warned about the credit crunch as it approached, where as with the oil crunch, a host of people – many in and around the oil industry – are shouting a warning.