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High hopes and hard truths dictate future
Jeroen van der Veer, UK Times
Efforts to fight global warming will be wasted unless we concentrate on energy efficiency
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When it comes to the future of energy, the world needs a reality check. Contrary to public perceptions, renewable energy is not the silver bullet that will soon solve all our problems. Indeed, in the decades ahead, three hard truths will generate turbulence in the global energy system.
We all know that global demand for energy is growing, but the reality of how fast hasn’t really sunk in. The first hard truth is that demand is accelerating. Energy use in 2050 may be twice as high as it is today, or higher still. The main causes are population growth, from six to more than nine billion people, and higher levels of prosperity. China and India are entering the energy-intensive phase of their development. This is the point when people buy their first television or car, or board a plane for the first time, and start to consume much more transport fuel and electricity. And most people in China and India have never boarded a plane yet! The pace of change is startling. Last year, China enlarged its electricity capacity by roughly the equivalent of Great Britain’s entire stock of power stations.
The second hard truth is that the growth rate of supplies of “easy oil”, conventional oil and natural gas that are relatively easy to extract, will struggle to keep up with accelerating demand. Just when energy demand is surging, many of the world’s conventional oilfields are going into decline. The problem is not the availability of resources as such. Overall, the International Energy Agency believes that there could be roughly 20 trillion barrels oil equivalent of oil and natural gas in place. This includes both conventional and unconventional resources, such as oil shale and sands. In theory, this is enough to keep us going for about 400 years at the current rate of consumption. In practice, though, less than half can be recovered with existing technology. The world now produces 135 million barrels oil equivalent a day of oil and natural gas. We could still raise that number with new technologies, but only gradually and certainly not indefinitely.
The third hard truth is that increased coal use will cause higher CO2 emissions, possibly to levels we deem unacceptable.
…So what about renewables, such as wind and solar energy? The share of renewables in the global energy mix could go up from its existing very low base of about 1 per cent to about 30 per cent by the middle of the century. …But even then, fossil energy will still make up most of the remaining 70 per cent. However, this is out of sync with what opinion polls show that most Americans and Europeans believe – that renewable energy will have replaced most fossil energy by 2050. As the hard truths make clear, this simply isn’t going to happen.
That is why energy efficiency is so important. More than half the energy we generate every day is wasted.
…The world’s energy system is entering a turbulent phase, and the only question is: how turbulent? A cooperative world will respond more effectively than a fragmented one. Provided governments create the right rules and incentives, and don’t throw up barriers, the global market will direct money and brainpower to the best solutions.
The author is chief executive of Royal Dutch Shell
(25 June 2007)
Energy crisis cannot be solved by renewables, oil chiefs say
Carl Mortished,, UK Times
…Speaking at the Royal Institute for International Affairs in London, [Rex Tillerson, the chief executive of ExxonMobil] pointed to a widespread failure by policymakers to understand the extent to which the aspirations of people in developing countries are fuelling growth in demand for energy.
Mr Tillerson said that world energy demand would rise by 45 per cent by 2030, and fossil fuels – oil, natural gas and coal – were the only energy sources of sufficient size, adaptability and affordability to meet the world’s needs.
…Mr Tillerson, speaking at Chatham House, expressed doubts about the oil industry’s ability to raise its game significantly without access to the oil reserves of the Opec countries of the Middle East.
“The supply outlook for nonOpec countries will be modestly up or flat,” Mr Tillerson predicted. He was sceptical about the drive by governments to increase use of biofuels and said that a fifth of America’s corn crop was being used to produce four billion gallons of ethanol, compared with targets of 12 billion gallons by 2012.
The ExxonMobil chief criticised the EU’s carbon trading system, calling it an administratively complex system that lacked transparency and failed to deliver a uniform and predictable cost of carbon. “It’s all about moving the money around,” he said.
Mr Tillerson said he would prefer a carbon tax that would enable the cost of carbon to spread through the economy in a uniform way, letting governments use the revenues to mitigate its effect by reducing employment or income taxes.
(25 June 2007)
The article also covers remarks by Jeroen van der Veer, chief executive of Royal Dutch Shell. See previous article.
Also posted at The Australian. -BA
Oil Price Surge a Risk as Non-OPEC Production Peaks, BIS Says
Tom Cahill, Bloomberg
Oil prices have a “substantial” risk of surging higher and boosting inflation because non-OPEC production may soon peak, the Bank for International Settlements said in its annual report.
“The short-run risks of sharp increases in oil prices remain substantial,” the Basel, Switzerland-based BIS said in its 77th annual report today. “The impact of oil price increases could be significant; a recent analysis estimates that a supply- induced doubling of prices would boost inflation in emerging Asia by as much as 1.4 percent points above baseline.”
The BIS, established in 1930 to manage Germany’s World War I reparation payments, said the effect of energy prices on inflation has become exaggerated by the demands of biofuels on food prices.
(24 June 2007)
Calderon No Fox in Mexican Pension Crisis, Bid to Raise Taxes
Adriana Arai and Patrick Harrington, Bloomberg
… Calderon, whose father, Luis Calderon, helped found the PAN in 1939, is trying to maintain his momentum. Last week, he sent a bill to Congress that would boost tax collection and help wean the country off oil revenue, which funds more than a third of federal spending. The proposal aims to boost revenue by about 300 billion pesos by 2012, mainly by collecting more taxes from corporations.
Mexico has Latin America’s second-lowest tax collection rate, after Guatemala. It must boost revenue from sources other than oil and partner with other companies to drill more crude, Calderon says, because Cantarell, the main oil field of state monopoly Petroleos Mexicanos, is producing less and less petroleum.
The field, which accounts for half of the country’s oil production, yielded 12 percent less oil in 2006 than in 2005, and production will fall another 15 percent this year, according to Pemex estimates.
Calderon, a former energy minister under Fox, says crude oil from the Gulf of Mexico buried in waters as deep as 1,500 meters (4,900 feet) represents the future of the oil industry. Pemex doesn’t have the technology to drill so deep, and Calderon is seeking the help of companies such as Brazil’s Petroleo Brasileiro SA to acquire it.
Mexico’s constitution and laws say the government owns all oil resources. According to Calderon’s development plan, issued on May 31, he’ll offer legislation allowing private companies to profit from certain oil activities that weren’t specified.
(25 June 2007)
The Ripple Effect Of Refinery Fires
Steven Mufson, Washington Post
…The rash of fires and other breakdowns, known euphemistically in the industry as “unplanned outages,” helps explain why motor-fuel prices have soared 36 percent this year. With the U.S. oil refinery industry already stretched thin, breakdowns and maintenance shutdowns have drained gasoline inventories just when the nation’s refiners would usually be ramping up for the summer driving season.
“When these facilities have one of these catastrophic events, it can have a disproportionate effect on the gasoline market,” said Carolyn W. Merritt, chairman of the Chemical Safety and Hazard Investigation Board. Lynn Westfall, chief economist and vice president for strategic planning for Tesoro, an independent refiner, said that because “we’re operating on such a razor-thin margin, we’re always one refinery incident away from a spike in prices.”
The amount that consumers paid to refine a gallon of gas more than tripled between January and May, according to the Energy Information Administration. In the past couple of weeks, a wave of gasoline imports has boosted inventories and eased prices slightly, putting the national average at about $3 a gallon. Yet gasoline inventories are still 10.6 million barrels, or 5 percent, below comparable levels a year ago, said Eitan Bernstein, oil analyst with Friedman, Billings, Ramsey Group.
Bernstein said “inventories will remain low throughout the summer, supporting the current high refining margin environment with any unexpected supply disruptions producing price spikes,” Bernstein said.
(22 June 2007)
