Producers struggling to meet oil demand
Oil prices rose above $116 a barrel last week, setting another record for the worlds most indispensable energy commodity. What was striking about this latest milestone was what did not happen: There was no shortage of oil, no sudden embargo, no exporter turning off its spigot.
The weak dollar, worries about terrorism and speculation on commodity markets certainly played a role. But, of course, so did demand. Producers are struggling to pump as much as they can to quench the thirst not only of the developed world, but of fast-growing developing nations like China and India, the two most populous countries. To many experts, the steadily rising price underscored longer-term fears about the future of a system that has supplied cheap oil for more than a century.
“This is the market signaling there is a problem,” said Jan Stuart, global oil economist at UBS, “that there is a growing difficulty to meet demand with new supplies.”
Todays tensions are only likely to get worse in coming years. Consider a few numbers: The planets population is expected to grow by 50 percent to nine billion by sometime in the middle of the century. The number of cars and trucks is projected to double in 30 years- to more than two billion - as developing nations rapidly modernize. And twice as many passenger jetliners, more than 36,000, will in all likelihood be crisscrossing the skies in 20 years.
All of that will require a lot more oil - enough that global oil consumption will jump by some 35 percent by the year 2030, according to the International Energy Agency, a leading global energy forecaster for the United States and other developed nations. For producers it will mean somehow finding and pumping an additional 11 billion barrels of oil every year.
And that is only 22 years away, a heartbeat for the petroleum industry, where the pace of finding and tapping new supplies is measured in decades.
The pursuit of oil will be just part of the energy challenge. The worlds total energy demand - including oil, coal, natural gas, nuclear power, as well as renewable energy sources like wind, solar and hydro power - is set to rise by 65 percent over the next two decades, according to the agency.
But petroleum, the dominant fuel of the 20th century, will remain the top energy source. It accounts for more than a third of the worlds total energy needs, ahead of coal and natural gas. Refined into gasoline, kerosene or diesel fuel, oil has no viable substitute as a transportation fuel, and that is not likely to change much in the next 30 years.
The problem is that no one can say for sure where all this oil is going to come from.
That might not sound like such a bad thing for those concerned about carbon emissions and climate change. High prices might end up forcing people to conserve and encourage the development of alternatives. But the energy crunch might also result in a global scramble for resources, energy wars and much higher energy prices.
Some oil executives are sounding the alarm bell. At a recent energy conference, John Hess, the chief executive of Hess Corp., the international oil company, warned that an oil crisis was looming if the world did not deal with runaway demand and strained supplies. The chief executive of Royal Dutch Shell, Jeroen van der Veer, said recently, with some understatement, that, “the energy outlook does not look rosy.”
For one thing, the worlds oil supplies are already stretched. Countries outside of the OPEC cartel - which have been the main source of new oil discoveries and production since the 1970s - have said they expect little to no growth this year in oil production.
The North Sea and Alaska are slowly running out of oil and producers there are struggling to keep production from falling. Russias phenomenal oil surge is coming to an end; a top executive of Lukoil, the countrys second-largest oil group, said last week that the countrys production was unlikely to grow much. Nigeria is battling a violent militancy. And Mexico, the third-most-important supplier of crude to the United States, has been stuck in a crippling political debate over keeping out foreign investors while witnessing a dramatic drop in production that some analysts say may be irreversible.
What about OPEC? The 13 members of the Organization of Petroleum Exporting Countries account for three-quarters of the worlds proven oil reserves. But for various reasons, most of those countries are making it harder, if not impossible, for foreign oil companies to invest within their borders.
William Chandler, an energy expert at the Carnegie Endowment for International Peace, estimates that if the Chinese were using energy like Americans, global energy use would double overnight and five more Saudi Arabias would be needed just to meet oil demand. India isnt far behind. By 2030, the two counties will import as much oil as the United States and Japan do today.
