by David A. Andelman in Business, Politics.
Greenpeace activists attempt to scale the Gazprom-owned Prirazlomnaya oil platform during a protest in the Pechora Sea September 18, 2013. REUTERS/Denis Sinyakov/Greenpeace/Handout via Reuters
Greenpeace activists attempt to scale an oil platform. REUTERS/Denis Sinyakov/Greenpeace/Handout via Reuters
There is a potentially catastrophic disconnect developing in the circuitry that powers the world. Sometime in the next 30 years, the planet may approach a point where its infrastructure and resources can no longer satisfy the exponential growth in human demands, especially among its least advantaged and most rapidly growing populations.
That is, of course, an extrapolation, but not an unrealistic one. Consider these frightening statistics: According to the U.S. Energy Information Administration, global consumption of energy will grow by 56 percent over the period between 2010 and 2040. Some 90 percent of this growth will come from non-OECD countries — commonly considered the developing world — that are in the midst of rapid growth and industrialization. And that’s the demand side of the equation.
The supply side looks just as grim: in order to meet these needs, both nuclear and renewable energy sources will need to have experienced maximum growth. But 80 percent of world energy needs will continue to rely on fossil fuels. This is the paramount issue: supply constraints.
Some years back, the hot topic when discussing fossil fuels was a concept that became known as Peak Oil — defined as “the point in time when the maximum rate of petroleum extraction is reached, after which the rate of production is expected to enter terminal decline.” When this concept came into vogue four decades ago, it was applied, largely, to Saudi Arabia — then the world’s largest oil supplier and the nation whose oil ministers drove the price of oil and the operations of the cartel that enforced production and pricing, the Organization of Petroleum Exporting Countries, or OPEC.
Matthews Simmons, a Utah-born investment banker, coined the term and proclaimed that internal documents he’d obtained from the Saudi oil company, Aramco, suggested Saudi oil production would shortly peak, if it had not already done so, and begin to decline. This was in 1974, shortly after the OPEC countries had sent a shock through the world economy by instituting an oil embargo following Western support of Israel in the Yom Kippur War, when a host of Arab nations suffered a catastrophic defeat. This demonstrated with appalling clarity the vulnerability of the world’s developed countries to the stranglehold that OPEC held over oil output. But it did more. It forced them to look elsewhere, and especially inwards, to secure their energy future. So along came British and Norwegian offshore wells, production in Mexico, massive fuel discovery and refinement in Russia. Finally, today, in the United States (especially the Alaskan North Slope) and Canada, vast new sources of production and pipeline projects have led both nations to the brink of energy self-sufficiency.
Yet the rest of the world has not stood still. Over the past 40 years, as many people joined the monetized economy as already existed within it. In China, India and across the entire continent of Africa, new blocks of people, many as large by themselves as the entire existing populations of the United States or the European Union, were suddenly becoming energy consumers.
And the quantity of new oil did not keep pace. Not surprisingly, under the most basic edict of classical economics, supply-and-demand, the price of oil has surged — from $3.60 a barrel ($20.04 in 2013 dollars) in 1972 before the OPEC embargo to $106 today.
But there are other geopolitical trends that pose potentially much larger risks for the future. As these new energy consumers were emerging, many went looking far beyond their own borders to lock in new supplies. Chinese oil companies have been active across Africa and parts of Latin America and Asia, quietly buying state oil firms or securing long-term supply contacts in places like Sudan, nailing down hotly contested offshore resources in the South China Sea, prospecting as far afield as Saudi Arabia’s Empty Quarter, the world’s most daunting desert. Such activities can be expected to become ever more intense as the gap between peak supply and soaring demand begins to widen, perhaps catastrophically in the not-too-distant future.
Later today, I will be moderating the “Energy – Supply and Constraints” panel for the Blouin Creative Leadership Summit, where I, along with Advantix president Hannah Granade, Gavin Electricity Initiative vice chair Kurt Yeager, DBL Investors managing partner Nancy Pfund, and MIT’s Thomas Malone, will attempt to thread a way through these thorny issues. Without question, there are other attendant fears, headlined by global warming and all the other horrors that also loom directly or indirectly as a consequence of mankind’s efforts to satisfy these energy needs. Already, the International Energy Agency has suggested that current trends in energy consumption will result in a 3 to 5.6 Celsius temperature rise over the next century — far beyond the optimal rise of 2 degrees that could still allow large stretches of our planet to remain habitable. One ray of hope came just this week from the Intergovernmental Panel on Climate Change’s (IPCC)’s new fifth assessment, which dialed back just a notch its predictons of future temperature acceleration. Global warming would be, the panel reported, “extremely likely” to be above 1 degree Celsius, “likely” to be above 1.5 degrees Celsius, and “very likely” to be below 6 degrees Celsius. This compares with its previous in 2007, that said it was “likely” to be above 2 degrees Celsius and “very likely” to be above 1.5 degrees, with no upper limit.
Still, without a rapid and universal shift to non-fossil fuels, these very needs themselves could lead to catastrophic wars, revolutions, or worse. The best hope is that market forces (and the power of human innovation) themselves may quite likely shape demand and tilt the world away from our problematic fossil fuels. The question whether those forces can come into play quickly enough to prevent the fossil-fuel wars that look increasingly like they will form part of our global security paradigm in the future.
David A. Andelman is the Editor of World Policy Journal. Previously he served as Executive Editor of Forbes. Earlier, he was a domestic and foreign correspondent for The New York Times in various posts in New York and Washington, as Southeast Asia bureau chief, based in Bangkok, then East European bureau chief, based in Belgrade. He then moved to CBS News where he served for seven years as Paris correspondent, traveling through and reporting from more than 70 countries. He is the author of three books, most recently, “A Shattered Peace: Versailles 1919 and the Price We Pay Today.”