The IEA Annual Report: A Dire Picture of Energy Supply and Demand

By Michael Kanellos

The International Energy Agency (IEA) released its annual report Wednesday, and it predicts we're in a heap of trouble, people.

The world will need to invest $26.3 trillion between now and 2030 to boost energy supplies to meet an expected 45 percent increase in energy demand in that year from today's level. That's over $1 trillion a year and lags in investment could cause crunches in supply and price spikes (see IEA report).

Greenhouse gases are going to be difficult to contain. To stabilize CO2 concentrations at 550 million parts per billion, far higher than today's 380 ppm-ish level, will require an additional $4.1 trillion invested in solar, wind, nuclear and other clean sources of electricity, the report said. That rise in CO2 concentrations, however, will lead to a 3 degree Celsius rise in average global temperatures. Coal will be the fastest growing fuel in absolute terms during the same period, and gas will remain the staple fuel for transportation. Fossil fuels will still likely account for 80 percent of the world's energy, only slightly down from earlier projections.

To keep greenhouse gases down to 450 ppm, which would only cause a 2 degree Celsius hike in average temperature, will require $9.1 million in investment.

On the positive side, increased energy efficiency could also save $7 trillion in fuel costs. A slower economy and move to alternative fuels is also crimping the rising demand for petroleum. The IEA now expects worldwide demand for oil to come in at 106 million barrels per day in 2030, 10 million less than last year. Currently, the world consumes about 85 million barrels a day.

Nonetheless, we're on a collision course with ourselves.

"Current trends in energy supply and consumption are patently unsustainable –environmentally, economically and socially – they can and must be altered," said Nobuo Tanaka, Executive Director of the International Energy in a prepared statement. "Rising imports of oil and gas into OECD (Organization of Economic Development) 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 [degrees] centigrade."

Most of the increase in demand for fossil fuels over the next few decades will come from China, India, the Middle East and developing regions. China and India, in fact, will account for over half of the incremental demand. Cities will also gobble up more fuel, rising from two-thirds of total consumption today to three-quarters of consumption by 2030.

OPEC will also become more powerful. The national oil companies, which are generally members of NATO, will account for 80 percent of the increase in petroleum. As a result, much of the investment will occur in those countries. Nonetheless, it is uncertain if even they will be able to pay for the plants and other facilities that will be required.

"Expanding production in the lowest-cost countries – most of them in OPEC – will be central to meeting the world's oil needs at reasonable cost," the report stated. "The prospect of accelerating declines in production at individual oilfields is adding to these uncertainties. The findings of an unprecedented field-by-field analysis of the historical production trends of 800 oilfields indicate that decline rates are likely to rise significantly in the long term, from an average of 6.7 percent today to 8.6 percent in 2030.

"Despite all the attention that is given to demand growth, decline rates are actually a far more important determinant of investment needs. Even if oil demand was to remain flat to 2030, 45 million barrels a day of gross capacity – roughly four times the current capacity of Saudi Arabia – would need to be built by 2030 just to offset the effect of oilfield decline."

click to enlarge

World energy demand will rise by 45 percent between now and 2030 – an average rate of increase of 1.6 percent per year – with coal accounting for more than a third of the overall rise.

- International Energy Agency

Cumulative investment in energy-supply infrastructure of $26.3 trillion is needed, but the credit squeeze could delay spending – especially in the power sector.

- International Energy Agency

Ninety-seven percent of the projected increase in emissions between now and 2030 comes from non-OECD countries – three-quarters from China, India and the Middle East alone.

- International Energy Agency

Comments

[bricki:]

Conservation has always been the least expensive way to keep energy costs down, and that is not about to change.

2008 Nov 13 10:06 AM

[cyclingscholar:]

The sky is falling the sky is falling! Where is the club of rome when ya need them. Lord help us...boy the world is such a scary place when ya take trendlines and extend them endlessly into the future.

I remember forecasts for $200 a barrel oil....BY 1990!

I needed a good laugh this morning, thanks folks.

As the previous letter makes clear, dollar for dollar the best investment is in conservation. Gonna be tough to cut my $20 a month heating bill, though.

cyclingscholart

2008 Nov 13 10:46 AM

[paulsjj:]

>That rise in CO2 concentrations, however, will lead to a 3 degree Celsius rise in average global temperatures. <

WOW! What Scientific precision: X CO2 yields Y Degrees Celcius. Like a scientific fact, proven by many repeatable and verifiable experiments with measured and observed data from the biosphere. Where is all this overwhelming evidence that we ordinary people can view and analyize it?

2008 Nov 13 10:56 AM

[winnersdon'...:]

Without question, conservation is an important facit in the energy debate., but let us not be so naieve as to believe that it's as easy as simply lowering the thermostat 5-6 degrees.

Worldwide industrial development and demographics is what's fueling mankinds need for more and more energy.

One has only to tune in Sundays at 8pm Est, to view the world's rapid development on the CBS show "The Great Race". That background is real, it's not computer generated. It;s what is actually happening in and around the world. India is second only to China in population. Every day more energy is required to fuel its needs.
Offshore drilling, shale oil, clean coal, nuclear, wind, solar even good 0le' cow manure.
I'm voting for "all the above".
Now that the vote is in, let's get this energy show loaded up and on the road.
America cannot afford to drag it's heels any longer.

2008 Nov 13 12:25 PM

[bricki:]

One of the issues that is not publicized at all is the disparity in energy input per GDP dollar generated across nations and industries. For example the UK requires about 6K BTU per dollar, while the US is at 9K overall. California though, with lots of high tech is at 4K/dollar. China is at about 8K BTU per dollar.

Based on these sorts of numbers it seems to me that with a little careful planning the US could easily reduce its energy consumption by 50% over the same time period as this study.

2008 Nov 13 12:48 PM

[Gone Green:]

HAVE PETROLUEM COMPANIES GONE GREEN?

By Jay Hitz

There are a small number of petroleum producers that are beginning to look at renewable energy/biofuels as a way of both committing to environmentalism but also as a hedge against a changing economic and political landscape. The company that is most visible in this regard has been BP [Ticker: BP]. BP has built quite a profile for themselves as a greener, if not totally green company. While some have called what is being done by the company as “greenwashing” most analysts paint a different picture.

Shell [Ticker: RDS] has also made an equally large investment into biofuels, along with BP, the companies have each committed $1 Billion. Shell’s Chief, Jeroen van der Veer, told Reuters in a March 19 interview that Shell was building the green energy businesses for the long term, and dismissed concerns about the short-term value of the operations to share prices.”It’s more basic than that … 50 years from now, we think about one third (of total energy use) will be from renewables,” he said. “You only build big businesses if you expect the profitability there.”

With Shell’s purely R&D cost/benefit focus and the amount of both companies’ investments it certainly gives lie to the idea that BP is simply indulging in a publicity stunt. In a 2006 interview with German newsmagazine Der Spiegel, BP Chief Lord Browne addressed this assertion directly,

SPIEGEL: BP earns its money primarily from the sale of fossil fuels, which are then burned and pollute the environment. But your advertising refers to BP almost exclusively as “Beyond Petroleum” — to cleaner energy sources beyond petroleum. How can such a company portray itself as an environmentally conscious business?

Browne: Because we simply are. This is a fact, not a ploy. We have put a great deal of store in being environmentally conscious for some time now. We have managed to reduce our internal CO2 consumption, we are investing in alternative energy sources like solar and wind, and we are very active in the development of biofuels.

SPIEGEL: Some see this public emphasis on the green side of BP as a way of diverting attention from a dirty reality.

Browne: I vehemently disagree! You can’t say that you either want oil and gas or a clean environment. There has to be a balance between both sides. Fossil fuels will continue to be a large part of the energy mix in the future, that’s the reality. It will take some time before technologies are available that reduce the importance of oil and gas. This is why the question we must ask is: Can we find an energy mix that affects the environment in a positive way while at the same time guaranteeing a reliable supply? I think we’re doing a great deal to make this happen.

Both companies have shown that their investments are more a pragmatic strategy than a public relations ploy. For many though biofuels and renewable power investment has been thought to be a long-term and speculative with few short-term profitable applications. Small firms that have moved into this sector are often seen as experimental startups that might not move into the black for a decade or more. With oil and gas becoming ever more scarce, a few smaller firms are looking at a greener approach to energy that can find profits in the current market.

One of these companies is Titan Oil and Gas, Inc. [Ticker: TNOG]. The company’s President, Brandon Toth has been looking at alternative energy sources as a way of offsetting a portion of the company’s carbon footprint as well as building in a bulwark for inevitable changes of energy supply and demand. In a phone interview he had some provocative perspectives on the topic. “I think that the narrow-minded way of thinking in regard to energy is getting in the way of innovation. Previous management were following a plan that had worked for companies for years, go and drill a hole and pray that you hit oil. Well in a few instances they hit so much water at the same time that the cost to extract was just prohibitive.

“We took a page out of the Budweiser playbook, in the eighties as aluminum prices were beginning to creep up they started one of the largest recycling companies in the world. BUD was not only saving money on their aluminum bill but also contributing to a cleaner environment. What is it that is on the bumper sticker, Recycle, Reuse and Reduce? We see our way of recovering oil and gas in the same way, in a way we step in others footprints to reduce Titan’s. We see reworking and recompletion as the oil and gas version of those original three R’s. Sure we looked at the BP approach and it looks great for a company of their size. From our point of view though, a small company with no research and development budget, we need something with cash value now, that will can also grow with each year. That’s how we have to approach environmentalism as a country too. I think, theories and a dime won’t buy you a cup of coffee.”

Toth continued, ”I see some advantages in getting involved in leasing not only the mineral rights under the land for energy production but the air above it too. Wouldn’t it be a good thing to put a wind turbine above every pumpjack in the country? If they are on producing food crop farms then they have to be plowed around right now anyway. Why not leverage that for higher profits? Put the turbine right next to the pumpjack and let the thing offset the wells carbon footprint and generate power to be sold into the grid as well.”

“We have leases in Kern County, California; the land in that area is desolate right now but for the pumpjacks. Kern does have sun and wind though, so why not throw solar and wind into the mix, Forbes magazine just named Kern County the number 1 place in the country to build solar. There is money to be made in building a greener company. You know the first 100% wind powered community in the country is in Missouri, not a place thought of as teaming with treehuggers. You think the good folks of Rock Port, Missouri moved to wind power because it was an economic loser?”

The Titan President went on to describe how BP has been using jatropha and camelina, plants that cultivate in poor soil conditions, because of their high oil content and their ability to be grown in arid climates. “These two crops can be grown in places that you just couldn’t grow food crops so the concern about biofuels spiking food prices is not an issue with them. What if we were to put these in on our Kern properties, right now we don’t have the rights to do this, but what if? The land is just sitting there now but it could be used to get us off of foreign oil as well. America needs to be thinking like this.”

Regarding some of the news about T. Boone Pickens’ Plan, “It is good to see someone like T. Boone Pickens say this because it will open people’s eyes a lot more than if I say it. His plan to redirect natural gas for transportation use and making up the difference with wind and solar is a good one. You put that together with using non petroleum fertilizers like biosolids that can grow biofuel crops like camelina or even corn with a much smaller carbon footprint than we are currently doing and you start to see some light at the end of the tunnel. We could use the biosolids in areas like Kern to grow these crops at the same time we are pumping oil and/or gas and generating electricity with wind, solar or both. The crops may not be as profitable as the oil, gas, wind or solar but it makes some money and that contributes to the bottom line. Then as the margins get better we are there first with the supply chain and the sales outlets.”

“Don’t get me wrong we want to make some money off of oil and gas and we will for a long time to come, but we don’t want to be holding the bag when demand drops significantly in a couple decades. Its like this, Nike is the most successful active wear company in the world but as their brand matured they understood that it was important to branch out. Now they own Cole Haan [a high end dress and leisure shoe brand] and Bauer [a hockey equipment company] and they are selling golf clubs too, it’s all the same business in a way and it gives their stockholders value. That is all we are doing is looking at giving our stockholders more for their hard earned money.”

For more information about BP Global log into www.bp.com and for more information about Titan Oil and Gas, Inc. log into www.titanoilandgas.com and for more information about Shell Global log into www.shell.com.

2008 Nov 13 12:52 PM

[bricki:]

On Nov 13 10:56 AM paulsjj wrote:

> >That rise in CO2 concentrations, however, will lead to a 3 degree
> Celsius rise in average global temperatures. <
>
> WOW! What Scientific precision: X CO2 yields Y Degrees Celcius.
> Like a scientific fact, proven by many repeatable and verifiable
> experiments with measured and observed data from the biosphere.
> Where is all this overwhelming evidence that we ordinary people can
> view and analyize it?

Yes, it is a fact. Arrhenius came to the idea of CO2 and its affects on climate back in 1896, and there is now over 100 years of R&D on the topic.

You can start with the journals Science and Nature, the copious lists of references they publish if you actually want to look at the data rather than reading the opinions of wingnut bloggers.

2008 Nov 13 01:05 PM

[CrossProfit_:]

The IEA constantly changes its outlook. Based on reviewing several years of 'annual reports' it seems that the general trend calls for higher consumption though the projected growth rate seems to be constantly adjusted to a lower actual rate.

There could be two reasons for the inaccuracy in the forecasts:
1) IEA analysts don't compensate for technology improvements for both production/consumption and pollution.
2) IEA analysts can not allocate government interventions that have yet to take effect.

When all is said and done, oil at $50 to $65 is where it should have been all along as stated in articles about a year ago. The 'financial crisis' is just an excuse for it to come down now that GS can no longer pump it up to $140.

As for the future; the next time we hit $140 it will be for real and won't come down again. Unless a viable substitute is developed, it is just a matter of time. Will it be 2030? It is hard to say as it may be well before.

Just like oil above $85 today threw the U.S. economy into recession (before the financial crisis hit), likewise should oil fall below $35 it will ignite a backlash that will cut off production and prices will spike.

Too high is no good and the same holds true for too low. Perhaps now Chavez, Putin and others will start listening to the Harvard educated Saudis' who were constantly warning about oil going over the $100 mark. The Saudis' attempted to 'talk' the price down. It's too late for this time, but let's try to remember for the next time!

CrossProfit

2008 Nov 13 02:27 PM

[Sober Realist:]

The Club of Rome back in 1972 concluded that if the entire worlds population were to enjoy the same standard of living we aspire to in the west, we would need 16 planet earths. Growth, growth, growth is relenting and seeking alpha. We can only conserve and improve efficiency to a certain degree before the ever plodding entity of Growth overtakes our increasingly complex solutions. Commodites are the only sure bet over time.

2008 Nov 13 03:13 PM

[nmelendez:]

Too late. Oil is going back down, except in the US. As soon as the DYI gets depressed to 50% a gallon of gas will cost 5 yuans or 10 US dollars a gallon.

2008 Nov 13 08:00 PM

[Greg Pinelli:]

It's fascinating to read the star gazer "analysts" in the previous posts! CrossProfit being the most hilarious..Oil caused a recession?? Please..how about the financial crisis? Ever heard of it? Also..in he hasn't joined the 21st century oil at $50 destroys product development! Oil at $35 pal means we're in a depression..not a recession. As for the IEA...
They've been consistently inaccurate because they put on blinders concerning Peak Oil..and they typical linear projectionists. So oil is at $100..it MUST be going to $200...! It's a measure of how quickly reality can make one man up that the IEA..who just last year didn't even know the word depletion..now realizes that the great fields of the world are draining faster than you can say "what the hell."
And imagine this..cruiser has a website! And oil is going back down! And oil is now sold in %s instead of real dollars...whoa dude..I'm amazed!

2008 Nov 13 08:31 PM

[john s. gordon:]

as pogo said many decades ago, we have met the enemy & he is us. (apologies to some union or confederate general or other).
> jack

2008 Nov 14 09:27 AM

[billp37:]

Yup.

"Worldwide industrial development and demographics is what's fueling mankinds need for more and more energy"

That's what PNM electric load forecaster Steven Brown reported.

See website.

2008 Nov 14 01:02 PM

[jmoore:]

The assumption that the CO2 rise automatically increases the global temperatures is not accurate. We need to learn more about human activity and natural climate change. We know that temperatures have fluctuated from warm periods to cold periods many times over earths life and assume they will do the same in the future. The question is what cost do we assign now to CO2 reduction if it may not be needed as energy demands increase. In the future we need to use all technologies to increase energy usage but let us do this correctly and not make assumptions that may be wrong.

2008 Nov 16 07:49 AM