Energy Forecasts

By Robert Hickson 30/09/2011 1

The US’s Energy Information Administration has released its International Energy Outlook 2011. This forecasts energy demand out to 2035.  A caveat is that their assessments assume no new policy or legislative initiatives being introduced that could affect energy markets.

Drivers: Economic development, technological innovation

Trends: Increasing energy consumption, diversifying energy supplies, exploitation of new sources of fossil fuels

Challenges: Costs of supply, economic downturn, environmental safety

Opportunities: Improving energy efficiency, developing renewable energies

A main prediction under their Reference case is that world energy consumption increases by 53 percent, from 505 quadrillion Btu in 2008 to 770 quadrillion Btu in 2035 (Btu stands for British thermal units – a measure of energy usage). This growth comes mainly from the continuing development of China and India, whose combined energy use will more than double, making up 31 percent of total world energy consumption in 2035.

Source: EIA
Source: EIA

Where will this energy come from? Mostly from fossil fuels according to the EIA (and most other energy assessments). Renewables – largely hydropower – are expected to be the fastest-growing source of world energy, with consumption increasing by 2.8 percent per year, but fossil fuels will continue to dominate.

Source: EIA
Source: EIA

 The EIA also anticipate that China, which has largely been powered by cheap coal, will rapidly expand its use of nuclear power, contrasting with slow or no adoption in OECD countries. It goes without saying that China’s nuclear power plants will need to be better built and managed than their rail system.  

The EIA have been accused of being too optimistic in their predictions of energy demand  because they seem to underplay the rising costs of recovery of fossil fuels. Other analyses forecast lower oil production. The 2010 report of the UK Industry Taskforce on Peak Oil and Energy Security (whose members include some major transport providers) predict lower oil production in 2015 than EIA estimates. Nevertheless, there is agreement that energy consumption will continue to rise. The Industry Taskforce on Peak Oil and Energy Security also expressed concern that

‘oil shortages, insecurity of supply and price volatility will destabilise economic, political and social activity potentially by 2015’

 The large reserves of what is called unconventional oil in North America hold great promise to some oil men. Daniel Yergin’s book ‘The Quest: Energy, Security, and the Remaking of the Modern World’  is optimistic that these reserves can be tapped economically with new technologies, and shift the oil balance from the Middle East back towards America. Others are of course concerned about the safety of existing and new oil recovery techniques. Not to mention the quantity of  greenhouse gasses that will get pumped into the atmosphere from increasing use of fossil fuels.

Whose predictions are right, if any? That’s hard to say, and is dependent on the assumptions made by the forecasters. Certainly another economic downturn will undermine some of the EIA assumptions, while technological advances could make extracting oil out of tricky things like shale both attractive price wise and safer. It is too early to judge what will happen. Most pundits agree that regardless of new reserves, the prices of fossil fuels will keep increasing.

The issue then really isn’t whether whose estimate of energy use is more accurate, given that the trends are similar.  The important questions are what price of oil (or coal or gas) will still allow us to enjoy economic, social and environmental well-being, and what do we need to do so we can switch to other forms of energy before then?

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