On any given day, a story emerges in the press that requires a second look, and then a third. Though these stories often do not appear on the front page, they frequently pertain to an issue more lasting in importance and more impressive in scope than most or all of the other news topics du jour. Today is one such day.
A secret cable newly released by WikiLeaks reveals that a senior Saudi government official has been warning American diplomats that the Arab nation’s oil reserves may have been overstated by as much as 40 percent, or 300 billion barrels. Saudi Arabia is by far the world’s largest oil exporter; if the official is correct, it is virtually certain that long-term crude oil prices will rise more quickly than previously expected.
Although most Americans are aware that the world is running out of oil, surveys demonstrate that the scope and immediacy of the problem is not widely understood. Last spring, the head of the International Energy Agency told a British newspaper that he believes peak oil will occur within the next 10 years, after which it will plateau for a decade and then begin declining.
By contrast, the Saudi official, Sadad al-Husseini, who was formerly the head of exploration for the state-run oil monopoly Saudi Aramco, thinks the IEA’s projection actually may be optimistic. In the cable, he is quoted saying that he believes peak oil production may occur within as little as five years. His comments didn’t roil the the oil markets, some surmise, because he hasn’t been shy about making them in the past.
Oil is the primary source of the world’s material prosperity — it’s compact, it’s easily transportable and it packs an immense amount of energy into a small volume. Economists agree that any decline in its production will have major ramifications for virtually every sector of the global economy — and the seismic activity won't stop there.
"We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse," Jeremy Leggett, a British oil economist, told The Guardian. Miller-McCune's Melinda Burns made a similar point drawing on U.S. government estimates.
The WikiLeaks cable calls to mind a report produced in 2005 by the Department of Energy. “The world has never faced a problem like this,” the DOE warned about the prospect of peak oil. “Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.”