The staid International Energy Agency is poised to bring a note of sanity back to the oil discussion next week, according to the Financial Times:
Oil prices will rebound to more than $100 a barrel as soon as the world economy recovers, and will exceed $200 by 2030, the International Energy Agency will say in its flagship report to be published next week.
“While market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over,” the report states …
“Current global trends in energy supply and consumption are patently unsustainable,” the report states.
Duh!
This is a strong reaffirmation of IEA’s “dire forecast” from July.
The above figure is IEA’s new demand forecast. Needless to say, for global fossil fuel emissions to peak by about 2020 and drop 50 percent from current levels by 2050 — in order to have a chance of keeping total planetary warming at or below the (hopefully) safe level of 2°C — then a 25 percent increase in oil consumption is untenable.
The new report lays out a stark warning about the difficulty of increasing supply even that much in the next two decades — and a starker indirect warning about the gross misallocation of global resources needed to achieve that increase:
The IEA estimates that by 2010 oil companies will have to commit to projects producing almost as much oil as Saudi Arabia — or about 7m barrels a day — if the world is to avoid a supply crunch by the middle of the next decade … The stark assessment comes as companies cancel projects from Kazakhstan to Canada because the collapse in oil prices makes them uneconomical.
The industry will have to invest $350bn each year until 2030 to counter the steep rates of decline of existing fields and find enough extra oil to satisfy the growing demand of countries such as China, the report states.
Output from the world’s oil fields is declining at a natural rate of 9 per cent, the IEA found, following the most comprehensive review of its kind. This decline rate is curtailed to 6.7 per cent when current investments to boost production are made. However, even with such investments, the decline rate worsens significantly to 8.6 per cent by 2030.
The declining rates are steeper than the industry had previously assumed. They are also slightly steeper than an earlier draft of the report because the IEA has expanded the study to 800 oil fields, adding 250 smaller fields.
The oil industry will “have to invest $350 billion each year until 2030” — a total of more than $7 trillion devoted to the Sisyphean effort of hanging on to a dwindling resource that is destroying the very climate that our health and well-being depends upon. Imagine what could be done if just half that money were allocated toward a sustainable energy future.
Ironically, an article last week in the Wall Street Journal noted, “Oil’s Slide Threatens Future Supply“:
Nobuo Tanaka, head of the International Energy Agency, the Paris-based watchdog, was one of several experts at the annual Oil and Money conference here predicting that the industry could be setting the stage for yet another supply-and-demand whiplash down the road. “We’re concerned that supply won’t catch up with demand after this crisis,” Mr. Tanaka said. “The supply crunch may come again, but in a more acute way … “
In two years’ time, “we could see much higher prices than we saw three months ago, if the investments are not going through,” said Fatih Birol, the IEA’s chief economist …
Mr. Birol said falling oil prices will also deter investment in alternative energy. Low-carbon technologies such as wind and solar were economically competitive only so long as oil prices were high. Countries set to meet in Copenhagen next year to agree a new deal on curbing emissions may decide it is a “luxury” in view of the financial crisis. Lower oil prices are “not good news for climate change,” he said.
While libertarians and conservatives continue to advocate a do-nothing or make-things-worse energy policy, thankfully Americans were smart enough to elect a president who is committed to pursuing an aggressive strategy of energy efficiency and clean, alternative energy even at a time when prices are (temporarily) low.
This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.
