Each year the larger oil production companies provide their views of the future, and I recently reviewed that for ExxonMobil. Shell has now produced their projections, though in a somewhat different format as the document “New Lens Scenarios”, which deals with future projections as a set of differing options. That does not make these views less informative.
In reviewing where the world will go, Shell looks more to political impact as the future unrolls. They see the European Union stuck in a Trapped Transition” where:
...the ‘can’ keeps being ‘kicked down the road’ while leaders struggle to create some political and social breathing space. So there is continuing drift, punctuated by a series of mini-crises, which will eventually culminate in either a reset a reset involving the writing off of significant financial and political capital (through pooling sovereignty, for example) or the euro unravelling.
On the other hand, countries such as China and Brazil are resilient:
in their different ways, they had the financial, social, political, or resource ‘capital’ to respond and reform, following a room to Manoeuvre pathway.
Within the next thirty years, as the population grows, so a greater percentage - up to 75% - will live in cities. And these will consume a greater fraction of the global energy supply, perhaps as high as 80%, up from the current 66%.
The document is very much slanted as a socio-political forecast, with considerable polemic in regard to the weaknesses that the company perceives to exist in the West.
Shell postulates two different scenarios for the future. There is the Mountain scenario, where business continues very much as usual, and then there is an Oceans scenario where the ”powers that are” work toward a more accommodative approach to those in the developing world, and to the less fortunate layers of society.
The document begins with the impact if the Mountain scenario is to prevail, driven through a top down control, largely through existing institutions. Shell is not enamoured of this:
In the US, for example, income and wealth inequality continue to increase, with stagnating middle-class earnings, reduced social mobility, and an allegedly meritocratic higher education system, generously supported by tax exemptions, whose main beneficiaries are the children of the successful. Superimposed on this class divide is an increasingly serious intergenerational divide, as commitments to the elderly via entitlement programmes crowd out discretionary expenditures that could rebuild economic and social infrastructure. Similarly, in Europe an ageing population and commitments to high levels of entitlement, which are frequently underfunded, create a mixture of social and political strains that deflect attention from the core structural economic issues facing the region.
Driven by this gloomy picture of the future, Shell anticipates that global GDP growth through the 2030’s will average under 2%. This will, in turn, moderate the growth in energy demand. Through increasing urbanization, the growth of the service sector and the greater use of electricity in developing countries, Shell anticipates that the strong correlation between economic and energy demand growth will be broken.
N.B. All the illustrations come from the Shell New Lens Scenarios document.
This is a guest post by James Hamilton, Professor of Economics at the University of California, San Diego. This post originally appeared on the Econbrowser blog here.
Those behind the theory appear to have been dead wrong, at least in terms of when the peak would hit, having not anticipated the rapid shift in technology that led to exploding oil and natural gas production in new plays and areas long since dismissed as dried up.
These comments inspired me to revisit some of the predictions made in 2005 that received a lot of attention at the time, and take a look at what's actually happened since then.
Posted by Rembrandt on April 2, 2013 - 8:05am
Tags: economics, edinburgh, electricity, energy, fossil fuels, global energy systems, nuclear, onference, renewable electricity, shale oil, unconventional, united kingdom [list all tags]
It is essential for energy professionals to stay well informed with the latest insights in this evolving world. For this reason, Euan Mearns of The Oil Drum, myself and several others, are organizing the first three-day Global Energy Systems conference, which will take place in Edinburgh, United Kingdom from June 26 - 28, 2013. This is the last week for Early Bird Registrations which are only available until April 5th.
The conference is meant to deliver key updates on the most pressing energy issues and challenges facing our energy system, as well as providing a forum for exchange of substantially different viewpoints. It is supported by several universities and research institutes including University of Aberdeen, University of Uppsala, University of Bristol, University of Edinburgh, Oxford Research Group, Chatham House and others. The scope is deliberately very broad, covering most primary energy sources, so that a global view of the current energy system can be presented. Session topics include “the limits to easily accessible fossil fuels”, “frontier fossil fuel technologies and basins”, “the viability of nuclear power”, “the costs and benefits of fossil versus renewable electricity”, and “the economics and policy of energy systems”.
A few of our confirmed speakers include Michael Kumhof (IMF), Tatiana Mitrova (Energy Research Institute Russian Academy of Sciences), Dr. Richard Stainsby, (UK National Nuclear Laboratories), Peter Jackson (IHS CERA), Alex Kemp (University of Aberdeen), David Shropshire (IAEA), Dr. Alexander Naumov (Group Economics BP), Guy de Kort (Shell Vice President GTL), Friedrich Schulte (RWE).
Read below the fold for an overview of the complete conference program.
This post began as a view on the developments in Cyprus and I am grateful to Gail for the suggestion. It is my fault that it morphed a little from that original simple objective.
One problem in marketing natural gas is that there is so much of it coming onto the market that this makes it difficult to set a price for future production. Even when the fields and reserves are estimated to be large, having some confidence in the price that the gas will bring in turn helps provide confidence with investors that there will be a positive return on the cost of bringing that gas to the market. However, once that initial commitment is made to invest the money, then the need for a return often drives an expeditious program to bring in revenue even if the market is already reasonably well supplied. Prices may then fall and the investment becomes a losing one.
The current cold weather in the United Kingdom and the threat of gas rationing has raised the price some 30% this month and the market appears lucrative. But the UK market, in the short term, can be rescued by 3 tankers of LNG from Qatar with more available if needed (provided it is ordered soon.) And then, though there remains a need to refill storage, the crisis will be over for now and the price will likely fall back, although likely not completely since the UK is in process of shutting down coal-fired power stations to comply with EU edicts and natural gas is the replacement fuel of the moment.
Looking further down the road, Centrica, a major energy supplier in the UK, has agreed to a 20-year agreement with a US supplier to buy LNG from the US (out of the Sabine Pass terminal). This would take a fifth LNG train at a facility where the first train is expected to come on line in 2015, and the second in 2016. Each train has a liquefaction capacity of 4.5 million tons pa or 220 bcf of NG, and customers have already been found for the first four trains – again for a 20-year period. The UK supply is therefore not anticipated to start until 2018.
In the meantime, Qatar has no plans to increase production in the face of the overall growing glut in supply, although it potentially could. And this availability of alternate supply is not good news for the Big Daddy of natural gas exporters, those in Russia. Russia has already seen Turkmenistan sell its natural gas to China directly, rather than through Russian middlemen. To date this has reached 1.7 tcf with further expansion in the works.
To make the situation more volatile, the natural gas discoveries in the eastern end of the Mediterranean over the course of the last five years have been found to be of increasing size, as exploration continues.
A friend asked me to put together a presentation on our energy predicament. I am not certain all of the charts in this post will go into it, but I thought others might be interested in a not-so-difficult version of the story of the energy predicament we are reaching.
My friend also asked what characteristics a new fuel would need to have to solve our energy predicament. Because of this, I have included a section at the end on this subject, rather than the traditional, “How do we respond?” section. Given the timing involved, and the combination of limits we are reaching, it is not clear that a fuel suitable for mitigation is really feasible, however.
Energy makes the world go around
Energy literally makes the world turn on its axis and rotate around the sun.
Energy is what allows us to transform a set of raw materials into a finished product.
Energy is also what allows an us to transport goods (or ourselves) from one location to another. Services of any type require energy–for example, energy to light an office building, energy to create a computer, and human energy to make the computer operate. Without energy of many types, we wouldn’t have an economy.
This is a guest post by Kris De Decker, founder and writer at Low-tech Magazine, an internet publication highlighting the need for elegant yet simple sustainable energy technologies. Read the article at Low Tech Magazine.
You don't need electricity to send or receive power quickly. In the second half of the nineteenth century, we commonly used fast-moving ropes. These wire rope transmissions were more efficient than electricity for distances up to 5 kilometres. Even today, a nineteenth-century rope drive would be more efficient than electricity over relatively short distances. If we used modern materials for making ropes and pulleys, we could further improve this forgotten method.
Posted by Heading Out on March 24, 2013 - 9:35am
Tags: coal-fired power, demand growth, electric car, electric power, exxonmobil, middle east, natural gas demand, north america, oil demand, oil supply [list all tags]
It is the time of year when the major oil companies issue their predictions for the future, and h/t Art Berman, ExxonMobil just released their view of the world, looking forward to 2040. And this is downloadable. If I remember correctly, I first viewed their future projections back in 2011 and with a two-year step, it might be more interesting to see how differences in their world view have evolved in that period.
By 2040, EM anticipates that the global population will be approaching nine billion, up by around 25% from current numbers. Of that nearly two billion additional folk most are expected to be born in the developing countries such as India and in Africa, with the former gaining 300 million and the latter 800 million. Because the majority of the growth occurs in these countries, and the improvement in living standards and working conditions are more energy intensive, (whether air conditioning or iPhones) from a lower base and demand growth is concentrated more in electrical energy demand than that of transportation fuels.
EM continues to believe that, while the economies of the OECD nations will contribute significantly to global growth, with economic output increasing by 80% over the 27-year period, energy demand will remain stable. Growth in demand for power will come from the rest of the world, powering an average 2.8% growth in the global economy over that interval.
Perhaps the greatest change has been in the amount of energy that the company anticipates will not now be needed in that future, as improving energy efficiency cuts back the amount that must be supplied. If we look at the energy projections through 2030 that were made by BP and EM back in 2011, the total growth was expected to continue in an almost linear mode through 2030.
If one now looks at the shape (the units differ) of the new EM curve, there is a dramatic emphasis on a continued improvement in energy efficiency particularly as we get further into the out years. (Note the remaining illustrations all come from the EM document “The Outlook for Energy: A View to 2040”).
In my view, wages are the backbone an economy. If workers have difficulty finding a job, or have difficulty earning sufficient wages, the lack of wages will be a problem, not just for the workers, but for governments and businesses. Governments will have a hard time collecting enough taxes, and businesses will have a hard time finding enough customers. There can be business-to-business transactions, but ultimately somewhere “downstream,” businesses need wage-earning customers who can afford to pay for goods and services. Even if a business produces a resource that is in very high demand, such as oil, it still needs wage-earning customers either to buy the resource directly (for example, as gasoline), or to buy the resource indirectly (for example, as food which uses oil in production and transport).
It is not just any wages that are important. It is the wages paid by private companies (rather than governments) that are important, as the backbone to the economy. Governments tend to get their revenues from private citizens and from businesses, both of which are dependent on wages of private citizens. There are a few pieces outside of this loop, such as taxes on imports from foreign countries. With the advent of free international trade, this source is disappearing. Another piece outside the US wage-loop is taxes on resource extraction, if these resources are exported.
Instead of using the analogy of a backbone, perhaps I should say that wages are the base that ultimately determines the quantity of goods and services an economy can afford.
Obviously there are other kinds of income, such as “rents,” but these, too, ultimately come from wage earners. Furthermore, businesses cannot earn money to pay dividends unless some consumer, somewhere, can afford to buy the goods and services their business is selling.
I have written recently about how the proportion of Americans with jobs rose to a peak, and since has been declining.
I decided in this post to look at the dollars these workers are earning. In particular, I decided to look at wages, other than government wages, adjusted to today’s cost level using the “CPI- Urban,” cost index of the Bureau of Labor Statistics. I discovered that these wages are doing very poorly. I also discovered a disturbing connection between high oil prices and flattening or declining wages. Putting all of these pieces together suggests a connection to “Limits to Growth.”
This is a guest post by Tom Murphy. The original can be found at Do the Math.
All the metrics looked great. The 2.7-year-old lead acid batteries in my off-grid photovoltaic system appeared to have settled into a consistent mid-life performance. Monthly maintenance (equalizing, adding distilled water) promised to keep the batteries in prime condition for some time to come. Based on cycle depth, I expected another 2.5 years out of the present set of batteries. Life was good.
Then, during my absence over the course of Thanksgiving weekend, one of the batteries expired. No forewarning. Just gave up. A previous post expressed an overall disappointment in batteries, now reinforced by this sudden nosedive.
In this post, I’ll show the metrics on my system detailing the demise of “Battery E.” The gruesome graphics are intended for mature audiences.
Posted by Heading Out on March 18, 2013 - 1:08pm
Tags: argentina, china, coal imports, coal-fired power, india, iran oil exports, iran sanctions, nuclear power, pope francis, poverty [list all tags]
The new Pope Francis comes from Latin America and has an understanding of the true depths of poverty that is uncommon in the United States and Western Europe. Outside the very Western urban part of downtown Buenos Aires lie the barrios and the shanties of the Argentinian poor. Life is more transient in neighborhoods where there is a lack of water, food, and opportunity, and where sanitation is a sometime thing. Government programs do not extend far enough or help many at the bottom of the ladder, and government statistics seem to hide much of the problem.
This holds true in many parts of the world. I was struck at the time of my first visit to China in 1987 by the contrast between the opulence of the walled community in which the “Western” hotels were located in Shanghai and the desperate poverty of the communities just the other side of that wall. Move forward some fifteen years and the cities of China are much different across much of the landscape. It is a transition that has been effected through large-scale industrialization and the vast quantities of power is expended in the growth and continuation of that industry. Such a transition is the vision for many countries in the world but the role of power in that change and the increasing costs that it imposes must be recognized. Just having a nominal power available is not, in itself, enough. Consider the case that India, a potential challenger to the Chinese in the marketplace, now finds itself in. As with China, the country has desperate poverty but it also has a developing industrial base that is driving change. But the rate of that change has been limited for some time by the amount of power available.