If you’ve been reading these pages for any healthy chunk of time, you know where we stand on oil.
There’s a finite amount of it. We’ve used about half. And the other half or so will be increasingly expensive and difficult to extract and refine, ultimately resulting sustained supply shortage scenario.
Those in the know would call this Peak Oil.
It’s the driving principle behind my energy investment philosophy, and it’s one of the key pieces of evidence in the case for a robust and timely deployment of massive amounts of renewable energy sources.
So that’s where I’m coming from.
Here’s where we’re going.
World Needs to Tap Oil Reserves More Quickly
That was the Reuters headline today as the International Energy Agency released its World Energy Outlook for 2008.
Of course, the agency didn’t come right out and say we were on the brink of feeling first-hand the ramifications of Hubbert’s theory. That would be too direct and honest.
Instead, they opted to cloak the real conclusion in clandestine language.
Reuters reflected that ambiguity: "The world is not about to run out of oil, but there is a risk its reserves may not be exploited fast enough to meet global demand growth in the years ahead."
So everything’s OK folks. We’re not running out of oil. We just don’t have enough of it.
Rather than saying Peak Oil has arrived, the IEA took the don’t-panic-the-public route and simply cited "obstacles to accessing new fields that include the increasing dominance of national oil companies."
The results? They’re startling:
30 million barrels per day of new oil capacity is needed by 2015
More than $26 trillion needs to be invested over the next 20 years to ensure adequate energy supplies (more than $4 trillion the 2007 estimate)
World oil supply will rise to 106 million bpd in 2030
Let’s digest those numbers.
We need 30 million new barrels per day (bpd) by 2015. We currently use about 86 million bpd. So that brings the new oil capacity requirement to 116 million bpd by 2015.
How about supply?
The IEA is saying supply will only rise to about 106 million bpd. And that won’t come until 2030. My guess is that we’ll be at about 95-100 million bpd by 2015.
So in a best case scenario we’re staring straight at a 16 million bpd oil shortage in the next 7 years.
While the IEA didn’t come out and say we’ve reached the peak, they didn’t pull any punches when it came to the future grim supply forecasts:
OPEC share of world oil output will rise to 51% in 2030, up from 44% today
Outside OPEC, production has already peaked in most countries and would peak in most others before 2030
Annual decline rates will increase in 800 of the world’s oil fields from 6.7% today to 8.6% by 2030
The price of oil will average at least $100 for the next 7 years
With the price of oil forecast to remain high and volatile, and no way for supply to keep pace with demand, you can bet a good portion of the IEA’s predicted necessary investment of $26 trillion over the next 20 years will go to sources of energy besides oil.
That’s why the IEA said $26 trillion was needed to "ensure adequate energy supplies," not adequate oil supplies.
And the IEA also had some insight on how the renewable energy market would play out in light of the dour oil picture.
IEA World Energy Outlook Stokes Renewables
According to the fact sheet released with the IEA’s report, the use of "renewable technologies grow most rapidly, overtaking gas soon after 2010 to become the second-largest source of electricity behind coal."
But it wasn’t just supply and demand that painted a picture of a major shift to renewable energy.
The climate is also a contributing factor.
The IEA says that "Preventing catastrophic and irreversible damage to the global climate ultimately requires a major decarbonization of the world energy sources. They added, "The energy sector will have to play the central role in curbing emissions – through major improvements in efficiency and rapid switching to renewables and other low- carbon technologies, such as carbon capture and storage (CCS). "
And that will be able to be done at cost parity with traditional energy resources.
The cost of renewable energy will continue to fall at the same time prices are surging for fossil fuels. That, coupled with strong policy support, will allow renewable to be cost-competitive without subsidies and allow them to be deployed more rapidly.
So rapidly, in fact, that wind, solar, geothermal, and marine energy will grow at an average annual rate of 7.2% per year through 2030. The use of oil is forecast to rise just 1% per year. Nuclear’s share of world energy, in case you’re wondering, was forecast to drop from 15% to 10% in the same time.
Which sector do you want to be invested in?
If you’re ready to begin now, I’ve just released a full report on how to break into the wind energy sector. It outlines the IEA report’s implications on the renewable sector, and offers three wind stocks that get a nice bump as a result of the news, and continue to rise along with our use of wind power.
For more on how to get on this booming industry, be sure to check out the Green Chip Review.
Call it like you see it,
Nick
