'Age of cheap energy is over': IEA chief
In his latest warning that a global energy makeover can’t come fast enough, the chief of the International Energy Agency (IEA) says, “The age of cheap energy is over.”
Speaking at the Bridge Forum Dialogue in Luxembourg earlier this month, Nobuo Tanaka said, “The only question now is, will the extra rent from dearer energy go to an ever smaller circle of producers, or will it be directed back into the domestic economies of the consumers, with the added benefits of increased environmental sustainability?”
Under a scenario from the IEA’s World Energy Outlook 2010 in which national governments move cautiously to reduce greenhouse gas emissions as they pledged at the 2009 UN Climate Change Conference in Copenhagen, the world by 2035 would need to replace three-quarters of the oil it now produces from existing fields. That amounts to a need for new production of more than 50 million barrels of oil per day — equal to the output of four Saudi Arabias. (And that’s not counting the extra 15 million barrels a day we’ll need to meet rising global demand.)
The IEA has estimated that depleting fields will cause production from existing wells to drop from 68 million barrels per day as of 2009 to 16 million barrels per day by 2035.
Add to that new questions about nuclear power raised in the wake of Japan’s Fukushima disaster, and the world’s energy future appears far from secure.
“Any slowdown in the development of nuclear capacity will have implications for energy prices, the overall fuel mix, climate change and investment,” Tanaka said.
So where will “the extra rent from dearer energy go”? In a paper presented at last year’s World Energy Congress, the oil and gas consulting firm RSK noted that in a world of $70-per-barrel oil, some $1 trillion in wealth is transferred from oil importers to oil exporters every year. With oil now past $110 per barrel, that wealth transfer is only accelerating. If we don’t ramp up our spending on energy efficiency, smarter grids and renewables soon, our rent checkbook could soon be depleted faster than those ageing wells in the Middle East.
