BP: World sees challenges for oil at 'reasonable prices'

What’s the most telling comment in this year’s BP Statistical Review of World Energy? It’s this statement from chief executive Bob Dudley’s introduction to the report:

“The world is not structurally short of hydrocarbon resources — as our data on proved reserves confirms year after year — but long lead times and various forms of access constraints in some regions continue to create challenges for the ability of supply to meet demand growth at reasonable prices.”

In other words, the world still has lots of fossil fuels, but it’s becoming increasingly harder to open the spigot further as a growing global population uses ever more energy.

These are the factors driving that reality:

• A world population that now stands at over 7 billion, and is projected to hit 9.3 billion by mid-century;
• Rapid economic development in Asia, Africa and the Middle East, where populations are also growing much faster than in the rest of the world;
• Rising fuel consumption in developing economies as more people there are able to buy motorbikes, cars, TVs, refrigerators and other energy-hungry devices. Oil consumption in 2011 grew most rapidly in Belarus (22.8 percent), Azerbaijan (11.9 percent), Vietnam (8.9 percent), Qatar (8.3 percent) and Argentina (8.2 percent);
• The world’s largest producer of oil — Saudi Arabia — is increasingly consuming a greater proportion of what it produces. In 2001, Saudi Arabia’s oil consumption came to 17 percent of its production. In 2011, it was consuming 24 percent of what it produced;
• The growth in global oil production has come almost exclusively from unconventional sources: oil sands, biofuels, etc. (Conventional crude production has been essentially flat since 2005.) Those unconventional sources are much more expensive to develop and bring online. For example, extracting fuel from Canada’s oil sands requires a minimum crude cost of $85 per barrel.

Put all of those factors together, and it’s clear that “reasonable prices” for oil will be ever harder to attain.