IEA Just Dropped A Bomb on Oil Industry

[Adam Varga + 123]

A shock report from the IEA calls for zero new investment in oil and gas. Forever.

https://www.youtube.com/watch?v=senffj5Hnro 

 

 

[Dan Clemmensen + 1,011]

The IEA report on which this was based basically said that IF governments are serious about their own stated goals, THEN all new fossil fuel projects must stop NOW.  IEA is not really taking a position as to whether or not these government policies are needed, or, useful, or reasonable, or feasible: those are all outside the scope of the study.  They pretty much worked backwards from the stated policy goals (major reduction in CO2 emissions by 2050) to what is required. In one sense, the report is calling BS on the governments.

In essence, they are saying "OK, if you really intend to mostly quit burning fossils fuels by 2050, then we already have enough proven reserves to last until then. No development of new reserves is needed."

I am skeptical. In particular, if we depend only on existing reserves, then Saudi Arabia and Russia will be able to force the prices up. That's great for holding down consumption, but maybe not so great for the global economy, and the global economy must stay robust to pay for the required shift to renewables. The US needs to keep producing to keep a cap on prices, and for shale, you must keep drilling to keep producing.

[BenFranklin'sSpectacles + 762]

21 hours ago, Dan Clemmensen said:

The IEA report on which this was based basically said that IF governments are serious about their own stated goals, THEN all new fossil fuel projects must stop NOW.  IEA is not really taking a position as to whether or not these government policies are needed, or, useful, or reasonable, or feasible: those are all outside the scope of the study.  They pretty much worked backwards from the stated policy goals (major reduction in CO2 emissions by 2050) to what is required. In one sense, the report is calling BS on the governments.

In essence, they are saying "OK, if you really intend to mostly quit burning fossils fuels by 2050, then we already have enough proven reserves to last until then. No development of new reserves is needed."

I am skeptical. In particular, if we depend only on existing reserves, then Saudi Arabia and Russia will be able to force the prices up. That's great for holding down consumption, but maybe not so great for the global economy, and the global economy must stay robust to pay for the required shift to renewables. The US needs to keep producing to keep a cap on prices, and for shale, you must keep drilling to keep producing.

I like the points you make here. Personally, I don't understand the purpose of this study and its announcement; maybe you can enlighten me.

I do have some initial thoughts though:

They claim this is about climate change, but I'm still not convinced anyone in charge actually believes in or cares about that. I find it much more believable that weaning the world off fossil fuels changes geopolitics, which our Glorious Leaders(TM) would definitely want. Even as a fairly conservative, gas-guzzling American, I can see the value in reduced oil reliance. I'd even tolerate somewhat higher energy prices to achieve it. If the Glorious Leaders(TM) are really after the geopolitics, could this study be a signal to important players? I'm obviously veering into the conspiratorial here and have no idea what's actually going on, but I do wonder if there's a little more than is explicitly stated. What do you think?

Interesting that they claim no more exploration is needed. That's all fine and well... except that markets don't work that way. At all. Even if you have enough oil, there's still value in:

• Finding cheaper oil.
• Finding oil in more stable countries.
• Finding domestic oil to reduce your imports.
• Creating excess reserves to hedge against unforeseen events.
• Creating excess reserves to wield against certain cartels that like to play games.
• (If you're America) Creating excess reserves so you can then refuse to spend $90bn/year defending the Middle East, ultimately allowing it to spiral into chaos so you can steal their market share.
• Intentionally destabilizing specific oil-producing countries to strip them of the wealth they were using to sow terrorism (*cough* Saudi Arabia) or failed political ideas (*cough* Venezuela) while simultaneously reap profits.

So I suppose the report is technically correct in that we wouldn't necessarily have to explore for more oil, but I don't think that's its real purpose. Why the pretense though? Perhaps they frame this new information in the rainbows and unicorns of saving the planet because the public doesn't like to hear about geopolitical strategy, the destabilization of entire countries, and all the unpleasantness that entails. That would be quite shocking to the spineless academics holed up in their ivory towers. Nonetheless, this report is a shot across the bow of certain unruly actors. The Western world may as well have explicitly said, "You played games and reaped profits when you thought you were immune to consequences. Now it's our turn." Meanwhile, it's stated purpose - indicating that no more exploration is needed - makes little sense.

I feel like I've beaten the geopolitical point to death a few times now. If I'm awash in delusion, would someone kindly reel me back in?

[Eric Gagen + 713]

I also read through the report, and as @Dan Clemmensen noted it is not, and is not intended to be a reasonable set of policy or economic forecasts.  It is an 'aspirational' projection of what would have to happen IF certain objectives were to be obtained.  With respect to @BenFranklin'sSpectacles I don't think it requires any conspiratorial suspicions to figure out why the IEA made the report - they lay it all out in exhaustive detail in the first 20 or 30 pages.  You are dead on about the 'no exploration needed' There is a big difference between need and want.  In a theoretical world where somehow perfect coordination of economic and political priorities of all locations and people could be obtained (i.e. a world where humans were ants in a single colony) no new oil and gas production would be needed, but in the real world it will happen.  This will cause economic issues - some good and some bad, but it will happen, even if an attempt to enact the IEA plan were made, which also won't happen.