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

Abstract

Abstract A new global energy market (GEM) model is developed for examining the global market shares (i.e. the mix) of solids, liquids and gases. The model is successful in matching historical trends for 155 years - from 1850 to 2005 - for solids, liquids and gases. The model also provides a good match of the hydrogen to carbon ratio (which is a good proxy for environmental quality) from 1850 to 2003. Finally, the model matches well the liquid, solid and grid energy sold to consumers in the United Stated since 1900. In all the cases mentioned above, the GEM matches the historical data with coefficients of determination (R2) equal to 0.99. Given these validations, the GEM is then used to forecast the global energy mix, global hydrogen to carbon ratio, and energy sold to consumers in the US until the year 2030. Although the past is not always an indication of the future, the good matches observed for historical data lead to the conclusion that the GEM can be used cautiously for evaluating outcomes and opportunities for the near future. Introduction The availability of abundant and inexpensive energy sources has been the driver of the industrial revolution and is still linked to the well-being of the global economy. There is concern within some factions of the energy industry about a potential energy crisis this century. Those who are concerned about depletion and subsequent harm to society are usually referred to as the "pessimists" (e.g. Banks,1 Campbell and Laherrere,2 Deffeyes,3 Goodstein,4 Simmons,5 Tertzakian6). Those who believe society will not be undermined, since there are abundant hydrocarbons and fungible resources, are the "optimists" (e.g. Adelman,7 Economides and Oligney,8 Hefner,9,10 Radetzki,11 Tilton12). The pessimists point out that petroleum resources are fixed physical stocks that will eventually be depleted. The optimists view petroleum as aworking inventory that is constantly being renewed as it is extracted. Petroleum, as used in this paper, is the summation of oil, gas and natural gas liquids. In the case of oil and other hydrocarbons, eventually there will be a maximum peak in production. The question is if it will occur sooner or later, and if it will happen because of depletion or because of substitution to other energy sources, perhaps unconventional. Recent work13–15 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 still occur due to lack of spare capacity, cartels, political instability, hurricanes and other natural disasters, strikes, shortage of qualified workers, shortage of refining capacity, commodity manipulation by speculators, and more recently the power of national oil companies. Global Energy Market Model (GEM) The model presented in this paper leads to what we are calling the "2030 1/3 forecast".It indicates that global energy needs will be met by approximately 1/3 of liquids, 1/3 of solids and 1/3 of gases by 2030. Although the model can be used for forecasting far into the future, it is currently calibrated to what we consider a reasonable time horizon - until the year 2030.