The spectre of energy

The second critical threshold advancing inexorably relates to energy. In sharp contrast to the warnings from the climatologists is the optimism of the energy industry based on predictions of unimpeded world economic growth. However, a forecast contained in the International Energy Agency (IEA) World Energy Outlook 2004 report suggests that developed countries will increasingly be at the mercy of OPEC (Organisation of Petroleum Exporting Countries). This cartel is set to provide half of the world's supplies of crude oil. The report warns that 'As international trade [in oil] expands, risks will grow of a supply disruption at the critical chokepoints through which oil must flow'. Reliance on fossil fuels will increase over the next two decades with the IEA forecasting that 85% of the increased energy consumption will be met by burning oil, gas or coal. The IEA also estimates that the cost of the new infrastructure to meet the growing demand for oil would be in the region of $16 trillion.

By 2020 the IEA estimates that world energy demand will have risen to 550 EJ (~ 13,000 mtoe) from about 440 EJ in 2004. Figure 16.1 shows the breakdown of fuels under this projection. By 2030 this will have risen to ~683 EJ (IEA 2005).

Another forecaster is the World Energy Council. Its medium to high growth projection more or less corresponds to the IPCC Business as Usual scenario, extending energy growth to 2100 (see Fig. 16.2). Global consumption in 2004 grew by 4.3%, which is the largest ever annual increase in primary energy consumption. Some, but not all, of the increase was driven by China, which increased its consumption by 15.1%. Over the last three years China's consumption of energy increased by 65% and it now accounts for ~14% of world energy demand. In 2005 it became the world's second largest importer of oil.

There is general agreement that reserves of fossil fuels are finite. Where opinions differ is over the dates at which oil, gas and coal will run out. A timetable produced by the Open University suggests that oil reserves will last about 40 years, gas about 60 years and coal 200 years.3 The latter could be nearer 100 years as coal is used to compensate for decline in oil and gas.

However, these estimates may be optimistic, depending on probable intervening factors. Based on the IEA forecast of annual oil consumption of 4.46 billion tonnes by 2010, conventional oil reserves will be exhausted by 2040. However, the Agency also predicts that demand will have risen to 5.26 billion tonnes by 2020, which is tenable considering the economic development of China, India, South America and the expected exponential rise in transport. In this

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Figure 16.1 International Energy Agency projections to 2020 by fuel (courtesy of IEA) 50

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Figure 16.1 International Energy Agency projections to 2020 by fuel (courtesy of IEA) 50

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Figure 16.2 Global primary energy use forecast - World Energy Council Scenario based approximately on IPCC Business as Usual scenario. On the basis of the WEC scenario the likely level of primary energy use by 2100 is in the region of 40 Gtoe (gigatonnes of oil equivalent: IGtoe = 42 exajoules)

case conventional oil will be used up by 2035.4 Oil consumption rose by 3.4% in 2004, which represents the fastest rise since 1978. China accounted for more than 33% of the increase.

The second critical threshold may be regarded as the point at which oil production is unable to match rising demand known as 'peak oil'. Colin J. Campbell of the Geneva-based

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1925 1950 1975 2000 2025 2050 2075 2100 -------------conventional oil ------------------ gas

1925 1950 1975 2000 2025 2050 2075 2100 -------------conventional oil ------------------ gas

Figure 16.3 Prediction of world production of conventional oil and gas to 2100 based on ASPO

Petroconsultants, a world-renowned expert on the subject, considers that peak oil was reached in 2005. Others put the date nearer to 2010. The difference is insignificant compared with the consequences in the marketplace. Once past the peak oil line price volatility will likely become increasingly severe with serious economic consequences. Already prices are steadily rising, confirming the view that the age of cheap oil is well and truly over. As previously mentioned, the price of US crude is expected to break the $100 a barrel mark in the not-too-distant future.

There will be no escape from the impact of high oil prices such as higher food prices leaving increasing populations facing hunger. Also, there is said to be a direct connection between the price of oil and the rate of unemployment.

In addition there are non-conventional sources of oil extracted from tar sands, shale, bitumen, heavy oil and deep water sources. These impose much higher extraction costs and will only offer a short respite for the market. Figure 16.3 offers a scenario for oil and gas which confirms the peak oil date of —2005 for conventional oil. Campbell predicts the combination of conventional and non-conventional oil peaking in 2007.

'If production rates fall while demand continues to rise, oil prices are likely to spike or fluctuate wildly raising the prospect of economic chaos . . . and even war as countries fight over what little oil remains'.3 This is the view of analyst Jeremy Rifkind of the US Foundation of Economic Trends. He continues: 'If we think oil is a problem now, just wait 20 years. It'll be a nightmare'.4

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