I urge you to read Dr. John Rutledge's article The Cost of Distraction.
In China last week I learned a disturbing fact from my friend Peter Schwartz at SRI. At current levels of oil per dollar of GDP and projected growth rates, China will consume more oil in twenty years than total global oil production today. It is paramount that both countries find ways of reducing oil and energy consumption per unit of GDP and do what we can to increase supplies of oil, gas, coal, nuclear, and renewable energy. [Emphasis added.]
That quote should give all of us pause. I have my doubts whether the world could produce double the amount of oil it does today. Or said differently, I have my doubts that the world can sustain production 170 million barrels of oil per day, which is double the current production of about 84 million barrels per day. And just imagine the environmental affects if we do consume 170 million barrels of oil per day.
Interestingly, the IEA projects that there will only be a 50% increase in global consumption between years 2002 and 2030. Please see the International Energy Agency's 22 September 2005 Press Release.
Oil and gas are likely to continue to dominate the world's energy supply for several decades. The IEA projects that, without new energy policies, oil demand will grow by more than 50% between 2002 and 2030 and that gas demand will almost double, with most of the easy, low cost, hydrocarbons being located in the Middle East. Accelerated technological development is going to be the key to supplying the required quantities at prices that do not impair worldwide economic growth, while ensuring diversity of supply origins.
We see that John's and the IEA's quotes do not agree. John appears to be suggesting that at least a doubling of supply will be required in twenty years. The IEA suggests that perhaps as much as a 50% increase will be required in 25 years. I am suspicious of China causing a doubling the global oil consumption. First, I doubts whether the world can actually produce that much oil. Second, even if the world can produce that much oil, considerable resources (capital, equipment, and people) will have to be mobilized to find, find, secure, produce, and refine the oil in a very short time frame. Good luck on the finding part as we have not found any elephant fields in decades. Third, as the world attempts to meet this insatiable demand, oil prices will go much higher. But remember, Economics 101 teaches us that price can only go as high as people can or are willing to pay. I think significantly higher prices may push many people beyond their ability to pay. And fourth, if production were to double, I would hope that people would begin to place more emphasis on environmental considerations.
That said, I encourage you to read Dr. Rutledge's post. He certainly gives us something to think about.
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