Folks,

Whenever the corporate media want to present a “balanced” view of our oil and natural gas problem, there’s one guy they always call upon: Daniel Yergin of Cambridge Energy Research Associates, or CERA. He’s that benign face on the TV assuring you that we’ll have ample supplies for the foreseeable future, who projects that we’ll add another 40 million barrels per day (mbpd) of production capacity by 2015, magically matching our projected demand. He’s the one who’s opinion is supposed to be as valid as the host of petroleum geologists who make up the ASPO, who say that we’ll hit the peak around 90 mbpd in 2010, or 4 mbpd more than today, in four years.

As for Yergin himself, here’s how FTW’s Dale Allen Pfeiffer describes him in his excellent critique of Yergin’s analysis:

Though Daniel Yergin is considered to be an authority on international politics, economics and energy, he is neither a scientist nor an engineer. Despite this lack of credentials, Daniel Yergin was awarded a Pulitzer for his book The Prize: The Epic Quest for Oil, Money and Power, and he is currently a member of the Board of the United States Energy Association, the National Petroleum Council, the US Secretary of Energy’s Advisory Board, and the US Department of Energy’s Task Force on Strategic Energy Research and Development. He is also a member of the Committee on Studies of the Council on Foreign Relations and a Foreign Associate of the Royal Institute of International Affairs.

With all of these credentials, one might wonder how he could author an article which is so misleading. However, I have seen him in action, arguing with several of my colleagues, and I can state that the man is a true cornucopian. He will not recognize any data that might shake his faith in Neoliberalism or free market economic theory. No doubt, he will consider this article to be rubbish, if he even bothers to read it.

 

Unfortunately, your average hapless viewer has no way of knowing that CERA’s projections are ridiculously optimistic, stretching the bounds of reason. He or she probably doesn’t know that CERA is “an independent research firm that gets its funding from a mixture of utilities, state regulators and other clients.” That certainly wasn’t mentioned when the Wall Street Journal printed Yergin’s commentary on August 9, 2006, wherein he blamed oil prices on a “wall of worry” and dismissed the Prudhoe problem. The pipeline shutdown is merely “precautionary,” and only five barrels were spilled! It’s not like BP has been criminally negligent in their maintenance of the pipes for the last couple of decades or anything.

In other words, asking Yergin and CERA for their opinion on oil depletion is like asking the Pope for his opinion of Catholicism. These are True Believers we’re dealing with here, people who have a deep and vested interest in maintaining business as usual. They are hardly objective observers, and their opinions are hardly as worthy as those of other well-known and scientifically objective observers, such as those of ASPO.

Let’s have a little reality here, shall we? Yergin’s case projects a wildly successful campaign to developing known sources previously considered exotic, and improved extraction methods. But he never mentions that improved extraction has not increased flows where it is practiced–at best, it delays the peak date and then produces a steeper falloff on the back side of the production curve, that’s all. And all the unconventional sources he pins his hopes on–ultra-deepwater/polar/NGL/oil shale/etc.–are going to prove much more difficult to bring to market, much slower to arrive, & much more expensive than projected. Hmm, how long would it take to build a pipeline from Antartica to…uh…?

Indeed, in recent weeks we have already seen various warnings that the cost of much-ballyhooed projects to produce liquid fuels from exotic sources like coal, oil shales, and tar sands will be double or triple the cost previously projected, and investors are fleeing for the exits. Why? Because of the cost of oil, natural gas, and base metals is skyrocketing–a highly predictable factor that somehow nobody doing the original estimates ever seems to take into account.

Here are two critiques of CERA’s latest report, both by members of ASPO. Professor Kjell Aleklett of the ASPO shows how and why CERA’s estimates cannot be believed, and Chris Skrebowski casually points out some of the more obvious “nonsense” in the report.

Beware of anyone who preaches business as usual about energy. We lose precious time letting the likes of Yergin lull us into complacency, time that would be better spent on mitigating the effects of the coming depletion. And the next time you see “that guy” on the TV, assuring you that everything will be just fine if we could all just stop worrying, know who you’re dealing with.

Commentary: Chris Skrebowski on OPEC trends and CERA’s new report

[Source: ASPO-USA Peak Oil Review, 14 August 2006]

As if that was not enough they have global production several million b/d higher in 2011 than the IEA’s new Medium Term Market Report (this only goes to 2011). As the IEA is usually criticized (correctly) for being too optimistic, CERA’s estimates (which escalate dramatically after 2011) are frankly just plain fantasy.

This raises two immediate questions: First, did CERA just start with the answer — 110 million b/d in 2015 — and then work backwards to fit? Second, on whose behalf or behest are they issuing this nonsense?

Chris Skrebowski, with the Energy Institute (London), has edited The Petroleum Review since 1997. He has spent his entire working career in the oil industry, split roughly two-thirds as an oil journalist and one-third as a planner/market analyst within the industry (for BP, Saudi Arabia, etc.).

(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators.)

We caught up with Chris Skrebowski for a quick Q&A just as he was preparing to depart for the airport, bound for Australia. He had time to provide quick observations about OPEC’s production trends and CERA’s new report.