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Are We Headed For Massive Oil Price Spikes? Leaked Cables Claim Saudi Oil Reserves Grossly Overstated

WikiLeaks revealed cables from a Saudi expert that say reserves of world's biggest oil exporter have been overstated by nearly 40 percent.

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After this graphic warning about the difficulties the Saudis are having even to replace existing production, much less grow it, the cable goes on to say "while this mission is far from embracing doomsday ' peak oil' theorists, Saudi Aramco's challenges are significant." Al-Husseini himself insisted to embassy staff that he "does not subscribe to the theory of peak oil", before going on to air precisely the concerns that advocates of premature peak oil do: that global demand has essentially met supply, and that a premature drop in global oil production lies a worryingly short way off.

Peak oil is not a "theory." Because oil is a finite resource, it is an inevitability. The debate is all about its timing. Al-Husseini is quoted in the 2007 cable as believing that beyond maximum possible global oil production lies a plateau of production lasting perhaps 15 years. Many others who have "pedigree and experience" think there will be a drop in production within just a few years, and we are in danger of that drop being so steep as to merit description as a collapse. In the YouTube interview al-Husseini recorded in 2009 he talks of a shortage of capacity withing just two to three years – by 2011, conceivably. He then says: "in the long term it's even worse."

The peak oil debate – whether one uses the "P" word or not – involves huge stakes. If US diplomats based in Saudi Arabia harbour fears that the Saudis can't produce enough oil to head off ruinous oil prices, then they are merely telling the US government what a spectrum of UK industry is already telling the UK government. 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, and quite possibly worse.

Jeremy Leggett is the founder and chairman of Solarcentury, the UK's largest solar solutions company.

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