Chris Nelder: Why energy journalism is so bad

Visto via Christopher Mims ( @mims )


One of the questions that plagues me constantly is, “Why is energy journalism so bad?” Most mainstream articles about energy will leave you horribly confused at best, or horribly misled at worst. Today I will try to teach you how to read reports on energy without getting lost.

The topic came up again last week when my colleague Christopher Mims pointed up a sharp discrepancy between three recent stories by Reuters, published between November 21 and 24.

The first reported Saudi Aramco’s CEO Khalid al-Falih as saying that unconventional oil (heavy oil, synthetic oil from shale and tar sands, coal-to-liquids and so on) had eliminated global supply concerns, and would rise from 2.3 million barrels per day (mbpd) today to 8.4 mbpd by 2035. This would shift the global balance of power, he said, and reduce U.S. dependence on oil imports. Further, he expected conventional oil supply from Brazil and Iraq to rise. All of this was by way of explaining why Saudi Arabia had recently halted its ongoing $100 billion program to expand production capacity beyond its claimed 12.5 mbpd current capacity, and would not seek to expand it to 15 mbpd (a fact that was already widely assumed by most who follow the energy markets, but apparently was still considered newsworthy).

The second said that oil prices should remain high because global demand had remained strong, and would reach more than 89 mbpd this year according to the IEA. (The International Energy Agency, or IEA, based in Paris and serving at the pleasure of the 28 industrialized countries in the OECD, currently shows 88.7 mbpd for Q3 2011 under a liberal definition of “oil” which includes biofuels and certain types of natural gas liquids. The Energy Information Administration, or EIA, based in Washington D.C. and serving under the U.S. Department of Energy, shows 86.7 mbpd under a more restrictive definition, which excludes biofuels, non-associated natural gas liquids, and other components.) But while demand has been strong, the article noted that supply has been “inconsistent,” citing the loss of 1.6 mbpd from Libya, and various “hiccups in production in Russia, Britain, Norway and Nigeria.”

The third suggested that high oil prices “could strangle economic hopes,” and quoted the IEA’s chief economist Fatih Birol: “I hope that colleagues from the producing countries are also looking at the market indicators carefully, including the diminishing OECD stocks levels and the fragility of the global economic situation.” In his view, too little worldwide investment in oil supply would keep prices high enough to stifle the recovery of the global economy.

So which is it? How can three stories from a single source, published over a five-day span, simultaneously claim that supply is adequate and inadequate; and that prices would remain high due to strong demand, but would be so high that they would destroy demand?

Even worse, how can the IEA simultaneously claim in its new World Energy Outlook 2011 report that by 2035, the world needs to invest $20 trillion in oil and gas supply and infrastructure to add 47 mpbd of new capacity (equivalent to about five times Saudi Arabia’s production, or twice the production of all OPEC countries in the Middle East) to compensate for the decline of mature fields, or else risk “far-reaching consequences for global energy markets”. . . while at the same time asserting that the world must slash subsidies for oil and gas development and transition to renewables quickly in order to arrest climate change, starting now?

Welcome to my hell.

Let’s review a few of the common errors in energy journalism.


A continuación, pasa revista a un numeroso elenco de asuntos, como:

— Uncritical acceptance of authority
— Optimism bias
— Bad arithmetic
— Missing the fine print
— How to read energy journalism: 1. Be skeptical. 2. Discount the sources. 3. Do the math. 4. Look for context. 5. Look up the references. 6. Compare to reality.



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