Assessing the Past, Present, and Near Future of the Global Energy Market

Abstract

Management This article is based on paper SPE 110215, which was presented at the 2007 SPE Annual Technical Conference and Exhibition in Anaheim, California. The availability of abundant and inexpensive energy sources has been the driver of the industrial revolution and still is linked to the well-being of the global economy. But there is concern about a potential energy crisis this century. Pessimists point out that petroleum resources are fixed physical stocks that eventually will be depleted, while optimists view petroleum as a working inventory that is constantly being renewed as it is extracted. In the case of oil and other hydrocarbons, eventually there will be a maximum peak in production. The question is whether it will occur sooner or later, and whether it will happen because of depletion or because of substitution to other energy sources, perhaps unconventional. Recent work suggests that there are enough hydrocarbons, available at production costs far below current oil prices, for society to substitute alternative sources before depletion becomes a problem. However, the successful transition after peak oil production depends on whether adequate investment in alternative sources takes place on a timely basis. With respect to hydrocarbon availability, the ability of technological advancement to offset the cost-increasing effects of depletion will be fundamental. Temporary shortages might occur because of the lack of spare capacity, cartels, political instability, natural disasters, strikes, a shortage of qualified workers, shortage of refining capacity, and commodity manipulation. Global Energy Market (GEM) Model The model presented in this article leads to what we are calling the "2030 1/3 forecast." It indicates that global energy needs will be met by approximately 1/3 liquids, 1/3 solids, and 1/3 gases by 2030. Although the model can be used for forecasting far into the future, it is currently calibrated to a reasonable time horizon, the year 2030. The pentagon shown in Fig. 1 describes the philosophy of the GEM model, explained primarily with the case of oil. In the center of the pentagon is global population, which has been increasing dramatically since 1950. The top of the pentagon shows historical energy consumption and forecast future energy consumption. The next corner shows the historical and forecast future fraction contributed by each primary energy source. Corner 3 shows actual and forecast consumption rates of each source. The question is whether there are enough volumes of oil, gas, and other resources to supply the rates forecast for the period in this study. This is answered in the next corner (4), which shows estimated energy resource availability by plotting recoverable petroleum volumes vs. the number of recognized petroleum provinces around the world. The final corner (5) of the pentagon shows a cumulative long-run supply curve that presents production costs of the world's recoverable petroleum volumes.