Shell Oil (LON: RDSA.L) just released a comprehensive and alarming assessment of the global energy outlook out to 2050. This is the latest in a series of industry admissions and leaks indicating that peak oil has rapidly moved from fringe theory to imminent reality.
The 78-page document itemizes some of the profound challenges the world will face trying to meet ballooning energy demands as conventional supplies dwindle and fossil fuel exploration moves into ever more expensive and dangerous areas such as deep water drilling.
Exacerbating these changes are geopolitical forces such as the transformation of economies in India and China as millions move to a middle class lifestyle, and the continuing shift of economic power from west to east.
Watch Shell's video summary of its report:
According to the Shell Report:
The key driver in our scenarios outlook remains growth in global population and prosperity as emerging nations enter their most energy-intensive phase of economic development. Millions are escaping poverty. They are gaining access to commercial energy in the home and benefitting from the industrialized production of household goods and infrastructure.
The energy system will struggle to match this surging demand for easily accessible energy. Supply, demand and environmental tensions will swell and spread. Political, industrial and individual choices will determine whether these tensions can be resolved and whether the solutions will be benign or harmful to us. Underlying global demand for energy by 2050 could triple from its 2000 level if emerging economies follow historical patterns of development.
The report predicts that even with innovation, conservation and expanded exploration there will be a global energy shortfall by 2050 equal to the entire conventional fuel industry in 2000 – a gap they gently refer to as a “zone of uncertainty”.
Coupled with this colossal energy shortfall will be the increasing impacts of climate change, which is already contributing to spiking food prices and social upheaval – most recently in Egypt. The Shell report states:
The majority scientific view is becoming increasingly pessimistic about the potentially devastating effects of climate change from greenhouse gases. Paradoxically, the global recession’s impact on public sentiment has diverted policy attention further away from the environment as a vote-winning issue.
Disillusionment at the pace of progress in the UN policy-negotiating sphere culminated in the perceived failure of the 2009 Copenhagen summit to reach new globally binding emissions targets. This has led some experts to question the very legitimacy and relevance of the process. Meanwhile, the worst offshore oil spill in history in the deep waters of the Gulf of Mexico has again raised concerns over the safety of producing oil and gas in frontier environments and led to renewed calls for tough regulation and more investment in renewable energy.
Dwindling supplies of cheap conventional fuels will mean potential price shocks and increasing demand for renewable alternatives. While this march towards price parity might not be good news in the short term for fossil fuel suppliers, the transition is already well underway.
A recent report by Bloomberg showed that onshore wind generation is now competitive in many cases with coal fired power plants – even in the absence of carbon pricing. Likewise, a utility in California recently announced plans to buy 250 MW of solar PV power over the next 20 years because it would be cheaper than gas fired electricity.
Shell is the latest major oil company to call for rapid public policy reform to move this transformation forward and avoid sweeping social, political and environmental upheaval.
Generations alive today have arguably enjoyed one of the most peaceful and prosperous eras in human history. The authors of the Shell report warn that ensuring this progress is not lost will require that decision makers, companies and consumers quickly embrace change:
The policies in place in the next five years shape investment for the next ten years, which largely shape the global energy picture out to 2050. Speed and direction are significant. How fast will tensions rise? How fast can we make the right choices? And how quickly can positive developments happen?
Societies have embraced sweeping changes at many pivotal periods in history. One of the largest oil companies in the world is the latest voice calling for this courage.
Image credit: Mark Rain via Flickr
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