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World Energy Outlook 2008-2030

The International Energy Agency's Projections

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World Energy Outlook 2008-2030
Once a year the International Energy Agency releases an extensive analysis of the energy outlook for the coming 15 to 20 years. The analysis focuses on the challenges posed by the world’s oil-dependent economies. The 2008 report, released on Nov. 12, 2008, buttressed the agency’s argument, made five months earlier, that the world would have to undergo an energy revolution over the next half century if it is to prevent energy shortages and greenhouse gas emissions from stunting economic growth. The cost of that investment: $45 trillion.

“We cannot let the financial and economic crisis delay the policy action that is urgently needed to ensure secure energy supplies and to curtail rising emissions of greenhouse gases. We must usher in a global energy revolution by improving energy efficiency and increasing the deployment of low-carbon energy,” Nobuo Tanaka, executive director of the IEA, said in London yesterday to mark the launch of World Energy Outlook (WEO) 2008.

“Current trends in energy supply and consumption are patently unsustainable – environmentally, economically and socially – they can and must be altered,” Tanaka said.“Rising imports of oil and gas into OECD regions and developing Asia, together with the growing concentration of production in a small number of countries, would increase our susceptibility to supply disruptions and sharp price hikes. At the same time, greenhouse-gas emissions would be driven up inexorably, putting the world on track for an eventual global temperature increase of up to 6°C.”

Secure energy supplies? Affordable supplies? Reliable supplies? Forget about them: the coming years are marked by uncertainty, declining supplies, rising demand and a still barely anemic interest in alternative energy (compared with the need), especially in the developing world, where most of the increases in energy demand are concentrated.

Here’s a summary of the IEA’s 2008 World Energy Outlook:

  • Global oil production is not expected to peak before 2030. (But global oil reserves are: they may have peaked already.)
  • Most of the increase in world oil production is projected to come from Organization of Petroleum Exporting Countries (OPEC). Their share of production will rise from 44% in 2007 to 51% in 2030. That will also likely increase OPEC’s political leverage as a group or by individual countries.
  • Saudi Arabia, the world’s largest oil producer and owner of the world’s largest oil reserves, is projected to increase oil production to 15.6 million barrels a day—up from 10.2 million barrels a day in 2007—assuming that the kingdom does not experience major social, religious or political upheavals. That assumption is risky.
  • The 2008 global credit crisis will slow energy demand but only temporarily. Fossil fuels (oil, gas, coal) will still dominate the energy landscape through 2030. Fossil fuels will account for 80% of the energy mix, barely down from what it is today. Industrialized countries will continue to rely disproportionately on those fuels.
  • If current government policies don’t change, energy demand will increase 45% between 2008 and 2030, or 1.6% a year, on average.
  • Among all fuels, coal will experience the steepest rise in demand, but oil will remain the dominant fuel. The reason: Too many countries still subsidize oil. In 2008, just 20 countries outside the industrial provided $310 billion in energy subsidies, some $150 billion of it for oil consumption.
  • China and India will account for half the growth in demand for energy between 2008 and 2030. The fast-developing Middle East will account for 11% of the increase, which also means that a large proportion of Middle East oil will reverse course—from exports to domestic consumption.
  • The industrial world is almost all tapped out of new gas and oil fields. As a result, almost all the increase in energy production will take place in countries outside the 30-country Organization for Economic Cooperation and Development (OECD). That means more Western reliance on non-Western energy sources, and more risk of supply interruptions.
  • The world will invest $26.3 trillion in energy-supply infrastructure between 2008 and 2030, some $13.6 trillion of which on electricity production. Most of the rest is investment in oil and gas exploration.
  • World oil demand will continue to rise at an average rate of 1% per year—from 85 million barrels per day in 1987 to 106 million barrels per day in 2030. All the projected increase will take place in China, India, the Middle East and other non-Western nations, due to faster economic growth. Demand in Western nations is actually set to fall, and the West’s share of global demand is projected to decline from 57% in 2007 to 43% in 2030.
  • The number of cars and trucks on the world’s roads, 650 million in 2005, is projected to grow to 1.4 billion by 2030, driving consumption of oil. Barring major shifts in policies or new inventions, the majority of the world’s vehicle fleets aren’t expected to be significantly more fuel efficient than they are today. Hybrid cars that use a combination of gas and electricity will slow the growth in demand for fuel, but not reverse it.
  • The world’s economies spent just over 1% of their economic output on oil in 1999. By 2007, spending on oil was up to 4%. Between 2008 and 2030, the world’s economies can expect to spend about 5% a year on oil in richer countries, 6% to 7% in poorer ones.
  • Proven oil reserves stand at 1.3 trillion barrels today, enough to sustain production for 40 years at current rates, but for fewer years at projected growth rates.
  • Even if oil demand doesn’t grow from its current 85 million barrels per day rate, the world still needs to add production capacity of 45 million barrels per day, by 2030, to offset the effect of precipitous declines in oil fields currently in production. That offset cannot take place absent massive investment, which will drive up the price of oil.
  • Greenhouse gas emissions will continue to increase. Energy-related emissions of carbon dioxide will increase 45%, mostly due to energy consumption increases in China, India and the Middle East—and mostly due to power generation.
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