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IEA Says Current Energy Trends “Call for Urgent and Decisive Policy Responses”

10/26/2004 Paris --- Claude Mandil, executive director of the Paris-based International Energy Agency, presented a reassuring assessment today of the prospects for global energy supplies, but drew attention to serious concerns about energy security, investment, the environment and energy poverty. He called for more vigorous action to “steer the global energy system onto a more sustainable path”.

Mr. Mandil made his remarks as he presented the World Energy Outlook 2004, which contains the IEA’s latest energy projections to 2030, during a press conference today in London. The Outlook is the IEA’s flagship publication.

Claude Mandil stressed that “the central message of the WEO remains an optimistic one. The Earth contains more than enough energy resources to meet demand for many decades to come. The world is not running out of oil just yet. Moreover, there is more than enough money globally to finance the large expansion of energy infrastructure that will be needed.”

But, he continued, soaring oil and gas prices, the increasing vulnerability of energy supply routes and ever-increasing emissions of climate-destabilising carbon dioxide are “symptoms of a considerable malaise in the world of energy.” He described the inexorable increase in global energy demand from now till 2030 that the WEO predicts – as well as our continuing heavy reliance on carbon-emitting fossil fuels – as “deeply troubling.”

In the Outlook’s “Reference Scenario”, which projects energy trends in the absence of new government policies or accelerated deployment of new technology, world primary energy demand is set to rise by 59% from now till 2030. Some 85% of that increase will be in the form of carbon-emitting fossil fuels: coal, oil and natural gas. Two-thirds of the new demand will come from the developing world, especially China and India.

Demand for oil will continue to expand, at 1.6% a year, from 82 mb/d today to 121 mb/d in 2030, and inter-regional trade in oil will double to 65 million barrels a day. Most of that additional trade will have to pass through vital chokepoints, sharply increasing the possibilities of a supply disruption. More and more oil will come from fewer and fewer countries, primarily the Middle East members of OPEC. The dependence of all importing countries on those suppliers will grow.

Gas use is projected to double by 2030, largely because it will be the fuel of choice for electric power generation. Coal will continue to supply a fifth of world energy needs, mostly in power generation and increasingly concentrated in China and India.

Nuclear power will grow very slightly, decreasing in Europe while advancing in Asia. Use of other non-carbon-emitting renewable energy sources will triple, but still will account for only 6% of world electricity production in 2030.
“These trends are, however, not unalterable. Our analysis shows that more vigorous government action could steer the world onto a markedly different energy path”, said Claude Mandil. World energy demand is 10% lower and carbon-dioxide emissions 16% lower in an “Alternative Policy Scenario”. The world’s reliance on Middle East oil and gas are also much reduced. More efficient use of energy in vehicles, electric appliances, lighting and industry account for more than half of the reduction in emissions. A shift in the power generation fuel mix in favour of renewables and nuclear power accounts for most of the rest. “Yet, even in this alternative scenario, energy imports and emissions would still be higher in 2030 than today and would still be growing.”

“What this analysis shows very clearly”, he added, “is that achieving a truly sustainable energy system will depend on technological breakthroughs that radically alter how we produce and use energy.” He called on governments to take the lead in accelerating the development and deployment of new technologies “that allow us to meet our growing energy needs without compromising our energy security and the environment.”

As in past editions, this year’s World Energy Outlook presents an exhaustive set of historical data and projections covering demand, supply, trade, investment and CO2 emissions for all fuels for 20 major world regions and countries. This year, WEO also includes a number of special features:

• A focused study of the effects of persistent high oil prices. It concludes that, if oil prices stay high, they would erode oil demand substantially and reduce the income of OPEC producers over the medium term.

• A detailed analysis of how oil and gas companies calculate their “proven”, “probable” and “possible” reserves and a comparison of current estimates. The study finds that current practices vary considerably among companies, confusing the overall reserves picture. The IEA calls for a new, universally-recognised methodology standard for reserve estimation.

• A hard look at the issue of energy poverty, including a new “energy development index”, a handy measure of how far countries have advanced along the road to energy maturity in the areas of per capita energy use, the use of modern energy services and rates of electrification.

• An in-depth study of Russia’s growing role as a major energy power. While recognising it as “the most important energy country” of the moment, there are enormous uncertainties surrounding Russia’s energy future.

• A “World Alternative Policy Scenario” – which for the first time includes the developing world and emerging market economies – considers what would happen if governments decided to act much more vigorously to combat environmental problems and reduce energy-security risks.

World Energy Outlook 2004 contains almost 600 pages of detailed statistics and in-depth analysis, illustrated with hundreds of colour graphics and easy-to-read tables. In recent years, the WEO has received awards from several governments and industry bodies for its high analytical quality. In closing his presentation of the book, Mr. Mandil added: “The WEO does not pretend to solve the multiple problems that disturb our energy world, but it supplies the statistical and analytical background out of which any solution will have to be crafted. It is, in fact, an indispensable document.”

Editorial Notes: This is a press release from the International Energy Agency ( www.iea.org/index.asp ). The BBC published a story based on the IEA report: news.bbc.co.uk/1/hi/business/3953907.stm . Reading the article, it's hard to see why the IEA called its report "a reassuring assessment." Perhaps because "The world is not running out of oil just yet. " -BA

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