Thursday, March 26, 2015

Recent radio interview on Israeli National Radio

I was recently interviewed by Doug Goldstein on his personal finance show, "Goldstein on Gelt," which plays on Israeli National Radio, the English-language radio network in Israel. Goldstein saw a piece of mine and asked me on the show to discuss the recent sharp decline in oil prices. A podcast of the interview is now available. Goldstein is a good interviewer with an eclectic mind and brought out the best in me with his conversational approach. The interview starts at about 2:30. Click here to go to the page containing the podcast.

Sunday, March 22, 2015

Cheap oil, complexity and counterintuitive conclusions

It is a staple of oil industry apologists to say that the recent swift decline in the price of oil is indicative of long-term abundance. This kind of logic is leading American car buyers to turn once again to less fuel efficient automobiles--trading efficiency for size essentially--as short-term developments are extrapolated far into the future.

The success of such argumentation depends on a disability in the audience reading it. The audience must have amnesia about the dramatic developments in the oil markets in the last 15 years which saw prices reach all-times highs in 2008 and then after recovering from post-crash lows linger at the highest average daily price ever from 2011 through most of 2014. And, that audience must have myopia about the future. It is an audience whose attention has narrowed to the present which becomes the only reference point for decision-making. History is bunk, and what is, always will be.

The alternative narrative is much more subtle and complex. As I've written before, the chief intellectual challenge of our age is that we live in complex systems, but we do not understand complexity. How can cheap oil be a harbinger of future supply problems in the oil market? Here's where complexity, history and subtle thinking all have to combine at just the right intellectual temperature to reveal the answer.

Cheerleaders for cheap oil only seem to consider the salutary effects of low-priced oil on the broader economy and skip mentioning the deleterious effects of high-priced oil. They seem to ignore the possibility that the previously high price of oil actually caused the economy to slow and thereby dampened demand--which then led to a huge price decline.

If this is the primary driver behind cheaper oil, then cheaper oil in this case is not a sign of abundance, but of lack of affordability for many of the world's people. It suggests that there is an oil price speed limit now in effect for the world economy above which it cannot grow for long.

If the ultimate significance of high-oil-prices-turned-to-low-oil-prices is a worldwide recession, then we will have a better idea whether such a price speed limit applies. The past does not offer much hope that it's different this time. Economist James Hamilton has documented that 10 of the last 11 recessions were preceded by a significant rise in oil prices.

This time around we haven't had a spike in prices, but rather persistently high prices above $100 a barrel for more than three and a half years prior to the oil plunge. This produced a different kind of pressure on the economy, but pressure nevertheless.

The Chinese economy is slowing down. The European economy is stagnant. Russia is or shortly will be in outright recession. Canada is teetering on the edge of recession and it seems Australia might go there, too. Japan continues its stagnant ways despite record monetary stimulus.

Cheap oil in its own way may be presaging, not a period of abundance, but one of austerity. That austerity has already hit the oil industry itself as it undergoes deep cuts in personnel and exploration and development spending.

The big question now is: Can oil be both abundant and cheap in the long run? Or are we living through the first period in history in which oil can only be "abundant" at high prices?

Of course, it's only abundant if you can afford it. So, demand for oil would likely remain subdued under a high-price scenario suggesting that we've burned through the cheap stuff and must find alternative low-cost energy sources or possibly suffer ever worsening recessions until we do. We can only hope that the 2008 crash is not a prelude to even deeper recessions ahead.

This would also suggest that we are perilously close to a ceiling on oil production mediated by a combination of affordability, geology and the limits of technology. The risk is plain, and yet, it is faith that sustains the optimists in a rock-solid belief that the future will be like past--until, of course, it isn't.

But faith isn't a good basis for energy policy, even if it seems to have worked in the past. An intellectually honest consideration of all the complexities of our energy situation reveals risks to adequate oil supplies worldwide from here on out that we can only ignore at our peril.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, March 15, 2015

Lipstick on a pig: America as the world's swing producer of oil

Most people have heard the old saying: "You can put lipstick on a pig. But it's still a pig." That's sort of what is happening in the American oil patch as producers try to put a positive gloss on the devastation that low oil prices are visiting on the industry.

Perhaps the most inventive redefinition is as follows: The part of the U.S. oil industry devoted to extracting tight oil from deep shale reservoirs in places such as North Dakota and Texas has made the United States the world's "swing producer." A swing producer is a country or territory that has large production in relation to the total market, substantial excess capacity and the ability to turn its capacity on and off quickly in response to market conditions.

The term makes the U.S. oil industry sound powerful and important. And, while the U.S. industry remains an important player in the world--third in production behind Russia and Saudi Arabia--it is most definitely not powerful in the sense that the moniker "swing producer" would imply.

To understand why this is so, we need only examine the history of the world's other two swing producers. Prior to 1970, Texas was the world's swing producer. Starting in the 1930s the state of Texas began regulating the amount of oil that an oil company could produce from its wells. It did this when overproduction drove the price of oil down to a mere 13 cents a barrel. (That's not a typo.) No one was making any money. Well owners were then forced to abide by a system called "proration" in which each well was allowed to produce at a percentage of its capacity.

The Texas Railroad Commission was given the responsibility to manage this percentage in order to insure that oil prices--and this meant world oil prices--would provide a fair return for oil producers. It would raise the percentage when supplies were tight and this would bring prices down. It would lower the percentage when supplies were too great and this would bring prices up.

By 1970 the world needed all the oil that Texas could pump and so the commission announced 100 percent "proration."* The commission essentially stopped regulating oil well output based on market demand. The inability of Texas to maintain significant excess capacity while supplying the market with adequate amounts of petroleum meant that the days of Texas as the swing producer were over.

The tightness of the world oil market set the stage for the Arab oil embargo and the success of OPEC. Neither would have been able to raise oil prices if Texas had been able to maintain significant excess production capacity. The ensuing price hikes led Saudi Arabia to build significant additional production capacity that it believed would allow the country to take advantage of rising world oil demand. When demand subsided in the early 1980s, the kingdom was stuck with substantial excess capacity and inadvertently became the world's swing producer.

Saudi Arabia had very large production, the largest in the world at the time. It had (and still has) oil that was cheap and easy to produce just as Texas had had when it first became the world's swing producer. And, the Saudis had the will to exercise discipline in raising and lowering production to moderate price declines and spikes.

The logic behind this role is that large oil producers neither wish to flood the market and make oil unprofitable, nor restrict production so much that high prices make substitutes for oil more attractive. In addition, prices that are too high are liable to crash the world economy, leading to a rapid fall in demand and thus prices. Swing producers prefer a "Goldilocks" world in which the price of oil is not too high and not too low, but just right to allow both producers and consumers of oil to prosper without making alternatives too attractive. It's a tough needle to thread.

Saudi Arabia has played this role (sometimes well, sometimes poorly) since the 1980s. Some say the country relinquished this role recently since it refused to reduce its production in the face of falling world demand and rising U.S. and Canadian production. But actually, the Saudis are merely doing what a swing producer has to do occasionally to discipline market participants who overproduce. They are punishing profligate producers now centered in the United States and Canada by allowing prices to drop precipitously in the face of excess supply.

The kingdom has declared that it is up to other producers to cut. This seems like an abdication of its role. But, in fact, the Saudis have punished other producers previously for overproduction in the mid-1980s by flooding the market with Saudi oil.

Still, many contend that this makes the American tight oil fields the world's swing producer by default. Let's see if the definition fits.

The production from American tight oil fields is significant, approaching 4 million barrels per day (mbpd). But is that production sufficiently flexible to qualify it as a swing producer? In the past when Texas was the world's swing producer, the Texas Railroad Commission merely adjusted the allowed percentage of the maximum "efficient" flow rate for wells already producing. That's pretty flexible.

Today, the Saudis claim that they can add or shut down production "immediately" in order to respond to changes in global demand. This flexibility also comes from having existing well production which can be adjusted up or down quickly. Almost certainly there are some wells not currently producing which can be called upon if necessary to boost production. How much is this spare production cushion? The Saudis say it is 2.5 mbpd. Not all agree, and no one knows for sure. But the Saudis and their close allies, the United Arab Emirates (UAE) and Kuwait, do appear to have substantial unused capacity estimated to be at least 3.3 mbpd.

The fact that the Saudis and their fellow OPEC members refused to reduce production in the face of weakening global oil demand does not necessarily disqualify Saudi Arabia from swing producer status. Sometimes swing producers allow excess production in order to discipline other market participants as I suggested above.

In light of this Saudi strategy, can we now say that America's tight oil plays are the world's new swing producer? It's true that America's tight oil fields have many existing wells pumping high-quality crude to the surface. But, we must ask: Can these wells simply be shut in or production reduced until the current oil glut abates? The answer is that most of them cannot.

Most of these wells have been drilled by public corporations using money from outside investors (through drilling partnerships) and from lenders such as banks and bondholders. Shutting in or throttling wells would reduce revenue and make it difficult to pay investors and lenders. In some cases, companies would violate debt covenants even though it might make sense for all parties to forbear until prices rebound.

Next, can production from the existing wells be increased in a short time? Because of the way these wells have been financed, they generally run at 100 percent of production capacity so that revenues can be realized as quickly as possible. The only way to increase production of tight oil in the United States substantially is to drill more wells, something that will be difficult to do under current circumstances. Lenders and investors will be reluctant to throw more money at an enterprise that has lost them great gobs of it even when prices rise again substantially. They will fear another Saudi-led assault on prices (which is exactly what the Saudis are counting on.)

This problem does not plague Saudi Arabia or its allies, the UAE and Kuwait. State control of oil resources means these countries can take a very long-term view toward current investment. They can drill and produce not subject to the lending and investment climate.

But perhaps the most salient difference between the oil produced by Saudi Arabia and that produced from tight oil plays in the United States is the cost of getting the oil out. The all-in cost of producing most tight oil is around $80 per barrel. But nobody wants to invest in something to break even, so $90 per barrel is a better estimate of what will attract investment capital.

Saudi Arabia claims that its extraction cost is around $4 to $5 per barrel. Even if this estimate is low by a factor of 10, Saudi Arabia is still in a position to withstand today's low prices.

The lesson is that the swing producer must also be a low-cost producer in order to have effective control of prices.

U.S. tight oil plays fail to meet the definition of a swing producer. Producers in these plays do not have the flexibility to lower and raise production quickly from existing wells in response to market conditions. In fact, U.S. production continued to grow through December in the face of declining prices, much of that growth coming from tight oil wells still to be completed and even some new drilling in prime spots. Many of these producers are on a one-way treadmill that requires them to drill faster and faster to satisfy lenders and investors. In addition, these producers are high-cost operators. Most are independents and cannot weather a sustained period of low prices without threatening the viability of their enterprises. For this reason operators are unable to make long-term commitments to build the significant excess capacity needed to play the role of the world's swing producer.

Moreover, there is no federal regulatory body comparable to the Texas Railroad Commission that can coordinate production throughout the United States.

So, while U.S. domestic oil drillers will continue to be an important factor in oil markets, they can best be characterized as marginal producers of oil. They produce the marginal barrels of oil for the market when the oil price gets high enough to make it profitable to drill their high-cost deposits as was the case before the recent drop in oil prices.

Naturally, nobody likes to be called marginal. So, the spinmeisters in the investment sales community and the industry are afoot reinventing the tight oil drillers as "swing producers." Investors and policymakers would be wise to stop staring at the glossy lipstick now being applied to the carcass of the U.S. industry. At least a pig with lipstick brings hope of a pork dinner at some point. All the industry has to offer now are shattered dreams and negative cash flows.

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*This refers to "prorated wells" and should not be confused with "proration unit" which is defined by the Schumberger Oilfield Glossary as: "The amount of acreage, determined by governmental authority that can be efficiently and economically drained by a well at a particular depth or horizon."

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, March 01, 2015

Taking a short break--no post this week

I'm taking a short break this week and next and expect to post again on Sunday, March 15.

Sunday, February 22, 2015

What is Saudi Arabia not telling us about its oil future?

It is popular these days to speculate about why Saudi Arabia cajoled its OPEC allies into maintaining oil production in the face of flagging world demand. As the price the world pays for oil and oil products has plummeted, the price OPEC members are paying in terms of lower revenues is high, even unbearable for those who didn't save up for just such a rainy day.

Was the real reason for the decision to maintain production the desire to undermine rising U.S. tight oil production--which has now proven embarrassingly vulnerable to low prices after years of triumphalist talk from the industry about America's "energy renaissance"? Were the Saudis also thinking of crippling Canada's high-cost tar sands production? Was it Sunni Saudi Arabia's wish to undermine its chief adversary in the region, Shiite Iran? Was the Saudi kingdom doing Washington's bidding by weakening Russia, a country that relies so heavily on its oil export revenue?

The Saudis say explicitly that they believe non-OPEC producers must now balance world oil supply by cutting back production rather than relying on OPEC--meaning mostly Saudi Arabia--to do so. And, those cutbacks in the form of drastically reduced investment are already taking place in the United States, Canada and around the world as low prices are forcing drillers to scale back their drilling plans dramatically. It is not well understood, however, that almost all of the growth in world oil production since 2005 has come from high-cost deposits in the United States and Canada which has made the two countries easy and tempting targets for the Saudis' low-price strategy.

Recently, investment manager Jeremy Grantham opined in Barron's that Saudi Arabia has probably made the wrong decision. He explains as follows:

[T]he Saudis could probably have absorbed all U.S. fracking increases in output (from today’s four million barrels a day to seven or eight) and never have been worse off than producing half of their current production for twice the current price … not a bad deal. Only if U.S. fracking reserves are cheaper to produce and much larger than generally thought would the Saudis be right. It is a possibility, but I believe it is not probable.

First of all, he vastly overestimates the ability of the United States to increase its RATE of production, though he correctly assesses the production cost and longevity (or lack thereof) of U.S. tight oil reserves. Even the ever-optimistic U.S. Energy Information Administration believes that U.S. oil production will plateau in 2019 (not far above where it is now) and start to decline after 2020.

But, my concern is with Grantham's assertion that the Saudis could have let U.S. drillers simply drill away while OPEC countries--meaning again, mostly Saudi Arabia--reduce their production without being worse off financially than they are now. U.S. tight oil production would presumably play itself out by 2020 or so and then start to decline allowing OPEC to recapture market share and raise prices again.

But there is one possibility which Grantham is blind to, one mentioned to me by a friend. It's a big what-if. But then pretty much everything is a what-if when it comes to the secretive Saudis.

What if the Saudis are acting now to undermine U.S. and Canadian oil production because they realize that Saudi production will soon reach a peak, level out for several years and then start to decline in no more than, say, a decade? What if the Saudis fear that energy efficiency, fuel substitution (say, toward natural gas), and mandated greenhouse gas emission reductions will inevitably diminish their oil revenues beyond the next decade? What if this coming decade will therefore be the best time to maximize Saudi revenues per barrel? It would then make sense for the Saudis to cripple North American production now with, say, a year of low prices which should be enough to make investors skittish for many years thereafter. Then, the Saudis can capitalize on higher prices during the next nine years as the kingdom experiences its peak flows and before energy use reduction strategies threaten oil revenues.

(This assumes that they are right about the reluctance of investors to return to the tight oil fields and tar sands after having been walloped by the current low prices, something that would slow or prevent further growth in U.S. and Canadian oil production. If investment returns readily with any price increase, it is possible we could see wildly fluctuating prices due to short boom/bust cycles in the U.S. and Canadian oil industry, something I regard as possible but unlikely. This is because I expect many if not most of the current tight oil leases to pass into the hands of the major international oil companies as a result of bankruptcies of and distressed sales by the independent tight oil players in the coming year to 18 months. Those majors will take a more measured and patient approach to the development of those leases.)

Now, of course, no one knows what the Saudis know about their own oil reserves or anticipated flow rates. Saudi Aramco, the Saudi national oil company which controls all oil development and production in the country, is 100 percent owned by the government and therefore is not obliged to release information to the public nor submit to an outside independent audit. But the Saudis have already publicly stated that the world cannot count on them for more than 12.5 million barrels per day (mbpd). The country currently pumps about 9.7 mbpd of which it exports about 6.9 mbpd.

If the Saudis are acting now to cripple U.S. and Canadian production for the reasons my friend suggests, it means world oil supplies are going to be much more problematic after 2020 than many people suppose. It implies that at some point in the next 10 years OPEC will cease to be able (rather than cease to be willing) to balance world oil supplies. And, it suggests that no one else will be ready to act in that role when the time comes.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, February 15, 2015

William Catton's warning

William Catton Jr., author of the seminal volume about our human destiny, Overshoot: The Ecological Basis of Revolutionary Change, died last month at age 88.

Catton believed that industrial civilization has sown the seeds of its own demise and that humanity's seeming dominance of the biosphere is only a prelude to decline. His work foreshadowed later works such as Joseph Tainter's The Collapse of Complex Societies, Richard Heinberg's The Party's Over: Oil, War and the Fate of Industrial Societies, and Jared Diamond's Collapse: How Societies Choose to Fail or Survive.

In Overshoot Catton wrote: "We must learn to relate personally to what may be called 'the ecological facts of life.' We must see that those facts are affecting our lives far more importantly and permanently than the events that make the headlines."

He published those words in 1980, and now, it seems, at least some of those facts have made their way into the headlines in the form of climate change, soil erosion, fisheries collapse, species extinction, constrained supplies of energy and other critical resources, and myriad other problems that are now all too obvious.

But, even today, few people see the world as Catton did. Few realize how serious these problems are and how their consequences are unfolding right before us. Few understand what he called "the tragic story of human success," tragic because that success as it is currently defined cannot be maintained and must necessarily unwind into decline owing to the laws of physics and the realities of biology. We can adjust to these realities or they will adjust us to them.

Perhaps the single keenest insight Catton had is that humans have become detritovores, organisms that live off the dead remains of other organisms. By this he meant the human dependence on fossil fuels which are the ancient dead remains of organisms transformed into oil, natural gas and coal.

It is the fate of detritovore populations to expand and contract with their supply of detritus. He likened modern humans to algae feeding on the rich surplus of nutrients from dead organic matter swept into a pond by spring rains and often multiplying so as to cover the entire pond with a green carpet. By summer, with the rush of spring nutrients depleted--nutrients which are like the one-time infusion of fossil fuels into human society--the algae population crashes, leaving mostly open water and sometimes just an uneven ribbon along the edge of the pond. It is a boom-bust population cycle well-known to biologists.

In 1980 it seemed as if this cycle might be mitigated by wise policy and serious, but achievable adjustments in the human way of life. By 2009 when Catton published his other book, Bottleneck: Humanity's Impending Impasse, he felt that the time for major mitigation of the inevitable bust portion of the population cycle had passed.

So, why even write another book? Catton explained in the last paragraph of Bottleneck:

I hope by the time [my great-grandsons] become great-grandfathers themselves, their generation will be so conspicuously more enlightened than mine was and our forebears were that the world population of bottleneck survivors will have evolved social systems better able to be circumspect in the use of their planet and its vulnerable biosphere. If readers of this book come to share similar hopes, and contribute to instilling them in their descendants, my reasons for writing will have been justified.

This is a humble ambition compared to the cautious hope that flowed from Overshoot in 1980. And, it is important to note Catton's emphasis on social systems for he was trained as a sociologist. He believed that despite our considerable technical prowess, our social system simply cannot contemplate making the drastic changes necessary to mitigate the downslope.

Perhaps the most important thing to note about Catton is that he did not blame anyone for the human predicament. To him that predicament is the natural outcome of evolutionary processes and the powers given to humans through those processes. That predicament is no more a product of conscious thought and intention than is the beating of our own hearts.

When I met and chatted with him for the one and only time in 2006, he was mildly jocular in the same way that his writing is, and he was upbeat in his attitude toward daily life, however disturbing the future may seem.

That was probably the product of a life spent in deep and patient study of the world around him, a world that yielded some of its most hidden and important secrets to him. And, he had the satisfaction of having published those secrets so that they would not be secrets any more.

Overshoot may stand as the central text of the 20th century about the ecological fate of humankind. The book represents a missed opportunity in that so few people were able to hear what Catton had to say in 1980, and so few want to hear it now--even as the headlines are filled with the very precursors of the bottleneck he laments in his last major piece of writing.

(To see my review of Bottleneck, click here.)

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.

Sunday, February 08, 2015

Alternate opinions: The world's energy information duopoly comes to an end

Recent developments are beginning to undermine the supremacy of the world's long-running energy information duopoly and its perennially optimistic narrative. Policymakers, investors and the public should take heed.

Until now most energy price and supply forecasts and analyses were based predominately on information from the globe's two leading energy information agencies: the U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, and the International Energy Agency (IEA), a consortium of 29 countries originally formed in response to the 1973-74 Arab oil embargo to provide better information on world energy supplies to its members.

Both agencies provide forecasts that are publicly available and widely covered in the media. What's not apparent is how dependent private forecasts issued by the energy industry and financial firms are on the work done by these agencies.

These agencies are able to bring to bear substantial financial resources and large dedicated staffs of statisticians, economists and other specialists focused solely on gathering and analyzing energy data across the world. Few organizations--except perhaps the major international oil companies--are able to muster such resources to monitor world energy. And, the major international oil companies make little of their analysis public. For policymakers and the public, the EIA and IEA have been the go-to sources for presumed-to-be objective energy information.

What's changed is the willingness of private donors to fund independent energy supply research on a scale not previously undertaken outside of government and industry control. The implication is that the world needs more diversity than the two current institutional opinions and the cryptic, self-serving pronouncements of the industry.

Two recent studies illustrate the point. And, they're not good news for the oil and gas industry. First, there is the study by the Bureau of Economic Geology (BEG) at the University of Texas at Austin. On the surface the bureau may seem too embedded in the heart of oil country. But, the money for its recent study on the future of U.S. shale natural gas came from the Alfred P. Sloan Foundation and NOT from the industry. The whole purpose has been to provide an independent, unbiased assessment of the future of shale natural gas in the United States.

The conclusions of that research--which I mentioned in a previous piece--are far more pessimistic about the future of U.S. shale gas than either the EIA or the industry. Those conclusions became an embarrassment for the EIA when the difference came to light in a recent article in the science journal Nature.

The second example is a study entitled "Drilling Deeper: A Reality Check on U.S. Government Forecasts for a Lasting Tight Oil & Shale Gas Boom" published by the Post Carbon Institute. (Full disclosure: I worked as a paid consultant to publicize this report. But, the fact that the funders provided money specifically for this purpose means they are serious not only about the research, but also about getting this alternative view out to the public and policymakers.)

"Drilling Deeper" aligns quite well with the findings of the BEG on U.S. shale natural gas. But, it goes beyond gas to analyze the future of U.S. tight oil derived from deep shale deposits. In doing so "Drilling Deeper" not only utilizes EIA data, but also data from one of the leading data providers to the oil and gas industry, Drillinginfo. That information costs money, and funders are now willing to provide that money.

All of this has put the EIA on the defensive. The Paris-based IEA, however, has not been directly challenged yet since the two studies mentioned above focus on U.S. oil and natural gas. Still, the growth in worldwide oil production since 2005 has been due almost completely to rising production in two countries: the United States and Canada--and that has huge implications for any forecast done by either agency, especially if the assumptions about future oil and gas production growth in those countries are overblown.

Both the EIA and the IEA have generally released similar worldwide forecasts for energy in the past. The IEA has in recent years, however, taken a more activist tack since its charter allows it to talk about climate change as a danger. And, the agency has warned about the lack of investment in energy of all kinds because of the recent drop in oil prices.

The IEA was the first to declare that conventional oil--that is, easy-to-get, low-sulfur, liquid crude--peaked in 2006. The world is now increasingly living on expensive, hard-to-get unconventional oil under deep ocean waters, in the Arctic and from deposits that aren't even liquid such as the Canadian tar sands. The IEA still claims, however, that given the proper investment, these unconventional sources can meet rising oil demand for at least another two decades.

The ever so slowly growing divergence between the EIA and IEA and the advent of well-funded independent original research suggest that the day of looking solely to the two governmental energy entities for energy information are over. Both failed to predict constraints on oil production in the last decade and a half, and both now continue--despite their seeming differences--to assume a business-as-usual future when it comes to energy, if not climate change. This is despite the growing evidence and chorus of experts calling such complacency into question.

Now, those experts are beginning to garner enough financial resources to create in-depth independent, data-driven analyses and disseminate them to a broad audience--one that no longer has to take either the EIA or the IEA at its word.

Kurt Cobb is an author, speaker, and columnist focusing on energy and the environment. He is a regular contributor to the Energy Voices section of The Christian Science Monitor and author of the peak-oil-themed novel Prelude. In addition, he has written columns for the Paris-based science news site Scitizen, and his work has been featured on Energy Bulletin (now Resilience.org), The Oil Drum, OilPrice.com, Econ Matters, Peak Oil Review, 321energy, Common Dreams, Le Monde Diplomatique and many other sites. He maintains a blog called Resource Insights and can be contacted at kurtcobb2001@yahoo.com.