Future energy demand and supply

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# 2.2 Global energy scenarios

Scenarios for forecasting future energy use tend to conform to three main types:

1. Historical growth scenarios assume that energy consumption will continue to rise along the same path as it has done historically.
2. Technological 'fix' scenarios reflect efforts to reduce energy demand by developing energy conservation, or more economic methods of producing and using energy, in order to sustain growth.
3. Zero/negative growth scenarios imply that society would make the voluntary or enforced decision that it had reached the end of growth.
• Could fossil fuels alone supply global consumption along a historical growth trend?

• Not indefinitely: Earth's fossil fuels are a finite resource, which would become depleted more and more rapidly in the face of rising consumption, no matter how vast they might seem today.

As early as 1972, a group of scientists and other professionals (the 'Club of Rome') warned that the exponential increase typical of historical growth scenarios for exploitation of most resources, including energy, was environmentally unsustainable. However, it was not their warning that forced a zero-growth scenario upon the world for a couple of years during the 1970s, but economic factors. Oil prices quadrupled during the oil crisis of 1973-74 following the Yom Kippur War (6-25 October, 1973), when the Organisation of Petroleum Exporting Countries (OPEC) cartel, dominated by Middle Eastern oil producing countries, cut oil supply dramatically. A further oil crisis occurred in 1979, when the Shah of Iran was overthrown and replaced by a Shia Muslim theocracy, soon to be followed by the Iran-Iraq war (at the time Iraq and Iran were the second and third largest oil-producing countries). Figure 7a shows details of the variation in oil production, from OPEC and other areas, in relation to oil-price changes for the period between 1973 and 2005. The effect of these major crises can be seen as sudden increases in oil price, and in the case of the Iranian Revolution as the beginning of a large decline in OPEC production, while non-OPEC production continued to rise. You might care to look for signs of other major developments in world history in Figure 7, as the 20th gave way to the 21st century — oil is the central feature of the world economy.

Figure 7 (a) Changes in the world price of oil from 1947 to 2004 — given here in terms of the purchasing value of the US dollar in 2004 — relative to major world events. (b) Oil production for OPEC and non-OPEC countries from January 1973 to February 2005.

Although oil production in the US peaked at around 1975 (Figure 6), production in other parts of the world has continued to grow, as Figure 7b shows, albeit with considerable variations among OPEC countries and those outside OPEC. Several of the changes relate to important events, as do changes in oil price (Figure 7a).

## Activity 1

Which of the three main types of forecasting are depicted on Figures 4 and 7b for the following periods?

• a.1940-1970
• b.1973-1975 and 1979-1983
• c.1985-2000

• a.The period 1940-1970 was dominated by gas and oil production curves that steepen with time, representing a scenario of historical growth, which was checked abruptly in the early 1970s.
• b.For the two short periods, 1973-1975 and 1979-1983, oil and gas production followed a zero or even negative growth scenario, due to the two separate political crises.
• c.The gradients of the oil and gas production curves between 1985 and 2000 are still positive (rising production), but they do not tend to steepen with time as they did earlier in the century; if anything, there is a trend towards curves that are becoming less steep with time. This is characteristic of technological 'fix' scenarios. Minor fluctuations in the curves' gradients reflect the interplay between technological and political factors.

The latter half of the 20th century clearly illustrates how unforeseen political events can radically affect energy scenarios, and not only in the short term. The oil crises of the 1970s boosted oil exploration in regions outside the Middle East (e.g. Alaska, the North Sea, the Niger Delta and the Gulf of Mexico) that is partly reflected in the growth in non-OPEC production after 1973, as well as encouraging energy conservation and efficiency measures. Demand for oil was reduced so successfully that the oil price fell sharply in 1986 to about $17 a barrel (price in 2004 US$). While the world's reliance on Middle Eastern oil decreased, so did the incentive to develop alternative, renewable energy sources. However, the influence of the vast Middle Eastern oil reserves (Figure 3) seems set to increase once again, prompting predictions of an OPEC stranglehold on global supply as early as 2008. Equally, the huge gas reserves of the Russian Federation promise to give Russia economic and political leverage, especially in Europe where dependence on gas supplies from the east is growing.

Since 1973 the world price of oil has closely followed major events that either originated in or affected the Middle East (Figure 7a). At the time of writing (late 2005) the world price had risen to more than US\$60 per barrel, and production from the main US oilfields in Louisiana had shut down following Hurricane Katrina. None of the events shown in Figure 7 would have been predictable only a few years before they occurred.

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