World Energy Outlook at 30,000 Feet
By Don G. Briggs, President – LOGA (Louisiana Oil & Gas Association)

On October the 7th IEA (International Energy Agency) released its 2008 Energy Outlook Summary. The full report was released on Monday, November 17th. The report is significant in that it is put together by the IEA, which acts as energy policy advisor to 28 member countries in their effort to ensure reliable, affordable and clean energy for their countries. IEA was founded during the Oil Embargo crisis of 1973-74. The 2008 Energy Outlook Summary for the first time acknowledges the fact that “Peak Oil” has arrived and projects an energy future that is important for all people to understand.

The opening paragraph of the summary said, “The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, socially. But that can — and must — be altered; there’s still time to change the road we’re on. It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply. What is needed is nothing short of an energy revolution.”

The demand for oil will not diminish any time soon. IEA projects the world demand for oil to grow to 106 million barrels per day, up from 85 million of today. Fifty percent of new growth will come from China and India. “Oil is the world’s vital source of energy and will remain so for many years to come, even under the most optimistic of assumptions about the pace of development and deployment of alternative technology. But the sources of oil to meet rising demand, the cost of producing it and the prices that consumers will need to pay for it are extremely uncertain, perhaps more than ever.”

To meet the projected increase in global oil output countries will have to provide timely investments. It will take some 64 mb/d of new supply to meet the world demand by 2030. Remember, oil is finite and depletes. It is estimated that the needed new capacity by 2015 will be 30 mb/d. Among the risks that will occur, if timely investments do take place, will be price spikes considerably higher than what we saw this year.

From the environmental perspective the report pushes for, “Securing energy supplies and speeding up the transition to a low-carbon energy system both call for radical action by governments — at national and local levels, and through participation in coordinated international mechanisms.” Securing the energy supplies will require an investment of over 26 Trillion dollars over the next 21 years.

The International Energy Agency calls for a global coordinated investment to meet the world’s future energy needs. Does such a climate exist? Especially since 50% of the growth in new oil output is projected to come from countries unfriendly to the United States. In IEA’s 2007 report, IEA said no such investment climate exists.

The report closes with the following, “we can be certain that the energy world will look a lot different in 2030 than it does today. The world energy system will be transformed, but not necessarily in the way we would like to see.”

Coming back to ground from 30,000 feet, what does all this mean to you, to your children and grandchildren? We currently import 70% of our oil demand, soon to be 75%. The answer lies in the hand of the new administration and President Barack Obama.