By Gioietta Kuo
The International Energy Agency (IEA) was set up during the oil
crisis of 1973 to serve as an energy policy advisor to the
industrialized nations of the West to ensure reliable, affordable
and clean energy. It acts as a watchdog on energy security,
economic development and environmental protection. As such its
short and medium-term forecasts are eagerly taken up by member
governments and world business communities alike.
The IEA's mid-term oil market report of July 9 issued a warning
that the world will be increasingly experiencing an oil supply
crunch with prices to soar to unprecedented levels over the next
five years.
The basic facts are that demand for oil will rise by 2.2 percent
a year between now and 2012 - up from a previous forecast of 2
percent - as the world's economy expands at 4.5 percent a year.
Industrial countries are having to place increasing reliance on
main OPEC countries due to continuing geopolitical tensions in
alternative producers such as Venezuela, Iran and Nigeria.
The IEA report said: "Despite four years of high oil prices,
this report sees increasing market tightness beyond 2010. It is
possible the supply crunch could be deferred - but not by much The
potential effects of a combination of low OPEC spare capacity and
slow non-OPEC production growth are of significant concern - all
the more so when considered alongside tightness in other
hydrocarbons, particularly the natural gas market."
Lawrence Eagles of the IEA warned: "The results of our analysis
are quite strong. Something has to happen. Either we need to have
more supplies coming on stream, or we need to have lower demand
growth."
An additional warning is that additional global refining
capacity over the next five years will not match earlier
expectations as a result of rising costs and a shortage of
engineers, which will delay construction.
Production of bio-fuels is set to reach 1.75 million barrels per
day by 2012, which is more than twice that of last year. However,
the important point is that this will only contribute to a mere 2
percent of global supplies.
There are two problems confronting bio-fuels, which will hinder
further growth. First is the fact that diverting corn into ethanol
has caused a doubling of global grain prices which has resulted in
larger than 10 percent rises in food prices in many countries such
as the United States, China, India, Mexico, and in other developing
countries.
Second is the economics of fuel production. It seems to be a
fact of life that wherever we turn to make new fuels, we find it
cannot be done without expending enormous amount of our resources
such as electricity from burning fossil fuels and water, defeating
the original purpose.
One might ask: What about the potentials of newly discovered or
hitherto unexplored oil fields in the Pacific Ocean, Gulf of Mexico
or in the Arctic Ocean, which was previously ice covered?
Most of them would need a combination of advanced and possibly
new technology and it would be perhaps a decade before we would see
significant oil flowing from them. Consequently that oil will not
be cheap.
The real trouble facing the world today is not just the oil
crunch, it is global shortage of power that is reaching crisis
proportions. This will increasingly come into play to curb demand
for energy and consequently reduce the economic growth rates of all
countries.
How does the impending oil crunch fit into the overall global
energy crunch? Currently, oil for transport accounts for 22 percent
of total world energy consumption. Apart from the limited potential
of bio-fuels discussed above, there are no miracle fuels in sight
that will replace oil for transport.
Oil currently constitutes the biggest component of the world's
marketed energy use at 39 percent, followed by natural gas (26
percent), coal (24 percent), renewables (8 percent) and nuclear (6
percent). In order to reduce the effect of burning fossil fuels -
oil, gas and coal - on climate change, it is imperative we start
replacing these traditional fuels by wind, solar, biomass, tidal,
hydro and nuclear energy.
The main renewable sources of energy, wind and solar, can never
provide a large fraction of our electricity needs - partly because
of the high capital cost, which is at least three times more per
watt than nuclear reactors - but a more important reason is that
wind does not blow nor sun shine all the time, so a large and
steady power source is needed to provide for the national grid,
which the electricity generated from renewable sources can plug
into.
For a variety of reasons, economics among them, it is never
likely that renewable sources can contribute to more than 20
percent of our electricity needs in the US.
For example, much technological progress is still required to
make the solar cells 10 times cheaper before they can be adopted by
the majority of population in the West, let alone those in
developing countries where per capita wealth is lower.
How do we then provide for the 80 percent of electricity to be
generated for the national grid? Of the fossil fuels, oil and gas
are running out and this leaves the controversial coal.
We all know the disadvantages of coal. It creates horrific
atmospheric pollution and toxicity that is injuring the health and
well-being of many in China. Worse still, it in fact generates
large amounts of greenhouse gases, which pose a threat to further
global warming.
Coal-fired power stations produce 1 metric ton of CO2, the chief
greenhouse gas, for just one mWh of electricity generated. No
wonder the world spewed into the atmosphere 27 gigatons (billion
metric tons) of CO2 in 2006.
As the world's demand for electricity will rise by 70 percent
between 2000 and 2030, the concentration of CO2 in the atmosphere
will rise to 44 gigatons, causing a world temperature rise of 1.5 C
from 1900.
The only salvation for the world's energy problems is nuclear
power, for reactors do not emit greenhouse gases. They are not very
expensive to build, about US$1/watt, that is US$1 billion for a
large 1,000 megawatt power station.
Unfortunately the world is woefully inadequate when it comes to
adopting new energy policies. It is forecast that by 2030 we shall
still be producing 75 percent of our electricity from fossil
fuels.
It is almost certain that without a fundamental change to a new
direction in the energy policy of many nations, the world's
temperature is going to keep on rising, with many dire consequences
such as sea level rise of many tens of meters. Not good for coastal
regions worldwide.
The author is senior fellow at the American Center for
International Policy Studies in the US.
(China Daily via agencies July 25, 2007)
