Major
oil price increases forecast
Posted: 17 May 2004
“Due to increasing demand and reducing reserves, oil prices
currently at $40 are likely to soon enter a period of sustained
rises resulting in a need to massively develop natural gas and renewable
energy resources” according to John Westwood of energy analysts
Douglas-Westwood.
“Oil reserves are depleting and demand growing. Recent increases
in oil demand from China, for example, are likely to accelerate.
The average American consumes 25 times as much oil as the average
Chinese yet China has 5 times the population and is industrialising
rapidly. Vehicle growth in China is rising rapidly and this will
cause global demand for oil to continue its increase.
Quoting from a number of new studies on oil, gas and renewable
energy published by his firm, Westwood said, “Any growth in
global economic activity increases oil demand such that at 1% demand
growth a production peak occurs in 2016, at 2% it occurs in 2012,
and at 3% it occurs in 2008. “The world’s known and
estimated yet-to-find reserves and resources cannot satisfy even
the present level of production of some 76 million barrels per day
beyond 2020.”
Oil Production to Decline
Oil & gas supplies studies author Dr Michael R. Smith of Energyfiles
said “although 99 countries have produced or can produce significant
oil, 52 are already well past their production peak, including the
US, and this is now happening in several more, including the UK.
Another 16 are at peak or will reach it soon. As graphically displayed
in the Energyfiles Online Database, once a country is past peak
production, there is a negligible chance that it will be able to
reverse its long-term decline. Of course when this happens to total
global oil supply then growth in demand will be impossible.”
“Large capital investments within OPEC countries are already
required to rapidly increase production after 2008 by at least an
additional 1 to 2 million barrels per day every year to offset declines
elsewhere. It is by no means certain that such growth in output
will be achieved as fast as is required. It is likely that the world
will then begin to see sustained growth in oil prices.
Oil Prices to Double?
“Once oil supplies begin to approach peak so oil prices will,
like during the oil shocks of the 1970s, double within 3 or 4 years
as the world changes from oil abundance to oil scarcity. Then prices
will continue to rise until sufficient falls in oil demand are achieved.
“Under such a scenario a new stable energy mix might ultimately
be achieved with substitute fuels but how long this will take is
uncertain.
“Price rises will depend on the real global response to impending
and actual shortfalls – a response that needs to be implemented
immediately. Drastic conservation will make prices fluctuate as
they did in the oil shocks, always settling at a higher level.
“Meanwhile producers will face steadily increasing government,
environmental and conservation regulations. Windfall profits arising
from energy price surges, which traditionally have funded new oil
and gas investment, will have to be, at least partly, employed in
bringing other forms of energy to profitability.
“Without early remedial action the discussion is not if oil
prices will massively increase, but when they will.”
Importance of Natural Gas
“Natural gas is the only viable fuel that can link the carbon-based
global energy supply used today to a renewables-based energy supply
that will have to be used in the future,” said Smith. “It
is the only relatively clean alternative to oil and coal, fully
supported by commercially effective production and distribution
technologies – there is little doubt that natural gas will
be the key fuel of the future.
“Total remaining gas reserves and resources are huge, estimated
at 275 Tcm, almost double oil resources in oil equivalent terms.
Russia holds the largest share but a significant portion is also
located in the Middle East.
“Global production of natural gas, currently some 2,600
Bcm, is expected to grow to 4,755 Bcm per year by 2025 an average
increase of 2.75% per annum. Estimates of capital required for its
exploitation range between $25bn to $40bn per year. Considering
LNG alone, we expect over $39 billion to be spent over the next
five-year period on LNG plants, carriers and import terminals.”
Renewable Energy Boom
“Environmentalists argue that the world should not wait for
a catastrophe before doing anything about global warming. Under
the same logic it would be unwise to wait before trying to develop
real substitutes and learn to cope with less oil,” said Westwood.
“The future driver for renewable energy will not be global
warming, but security of supply.
“We forecast a major increase in investment in all sources
of renewable energy as ‘conventional’ energy prices
rise. Windpower is already attracting investment but as onshore
sites are used up attention is being focused offshore. Only 16 offshore
windfarms have been installed to date, but our World Offshore Wind
Database now lists over 220 prospects. Of course not all will go
ahead, but what is certain is that a significant new sector is now
developing. Wave and tidal power is at an even earlier stage of
development but already some 70 prospects are under consideration.
“Biomass is also attracting attention worldwide with power
plants under consideration using a wide range of feedstocks, from
farm and forest waste to specially grown energy crops.”
Douglas-Westwood is an independent company specialising in energy
business research and analysis. Based in Canterbury, England, its
client list reads like a ‘who’s who’ of the world
energy industry, from the oil majors and their contractors to renewable
energy operators and the major investment banks.
“The World Oil Supply Report” and “The World Gas
Supply Report” forecasts future supply by country. “The
World Biomass Report” forecasts capital expenditure by region.
The Energyfiles online database can be seen at www.energyfiles.com
For more information see www.dw-1.com
Posted by Richard Price,
Editor Pipeline Magazine
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