HSBC does not mean to scare you in its latest report, but it does point out that we are facing a massive energy crunch. That’s because the bank is just not optimistic there is much oil left in the world – in fact a mere 49 years of the black gold on current consumption levels.
That’s almost as apocalyptic as U.S. President Barrack Obama’s energy strategy speech Wednesday: “The United States of America can not afford to bet our long-term prosperity and security on a resource that will eventually run out. Not any more. Not when the cost to our economy, our country and our planet are so high.”
While oil’s days may be numbered, HSBC says gas is less of an issue but has logistical and transportation challenges; coal is abundant but the worst carbon culprit. Other energy sources become viable only if oil prices remain high and that potentially means that in a convoluted way, the world has to suffer high oil prices for long periods in order to wean itself off it.
Nuclear energy is interesting but with Japan’s recent crisis its eager uptake is unlikely at least in the near future.
“At more than US$100 per barrel, substitutes for crude such as tar sands and synthetic liquids become more viable. Towards US$150 per barrel biofuels come into their own,” HSBC analysts write in ‘Energy in 2050′ report.
And that’s just to meet current levels of global energy consumption. The bank expects global consumption levels to surge as emerging markets develop their economies:
- A 110% increase in oil demand to more than 190 million barrels a day to fuel the extra billion cars that are likely to be on the road as emerging world incomes increase.
- A doubling in total energy demand as emerging market growth powers ahead.
- A doubling in the amount of carbon in the atmosphere, more than three and a half times the amount recommended to keep temperatures at a safe level.
But HSBC’s key point is that the world’s 2050 energy output will not be able to meet the demands made on it.
New oil discoveries are harder and rarer to find, such as the one announced by Statoil and Eni in the Northern Arctic on Friday. The IEA estimates that since 1990, each year new discoveries have only been sufficient to offset half of production. Equally worrying, the size of fields discovered has been falling and is currently around one tenth of the size of discoveries made in the 1960s.
“In reality we cannot reach the world we envisage for 2050 in the way we are using energy today,” says HSBC, arguing that we need to use energy far more efficiently and adding healthy doses of other renewables in our energy cocktail to limit the harm and pressures on dwindling supplies of fossil fuels.
While there are no easy solutions to solve the energy crisis, HSBC does argue that developing more fuel-efficient cars is a ‘low-hanging fruit’ that could make a dent in oil demand.
Passenger cars account for more than half the demand for transport energy, which would rise as China expected to see its cars-per-thousand-people rise to 350 cars by 2050 from 22 cars today, and for India to 200 from 55. Put another way, the extra demand will lead to the consumption of 190 million barrels of oil per day, from its current level of 90 million barrels.
“Smaller, more efficient cars will get you from A to B, just not as quickly,” HSBC notes simply in the report.
Despite these efforts, all the dynamics point to an era of high energy prices, the report says gloomily:
- Further efficiency gains and the deployment of low-carbon energy sources are unlikely to materialise without further upward pressure on fossil fuel prices.
- The lead times on alternative solution are often long. Therefore the squeeze on fossil fuels in the interim could be both persistent and painful as oil prices are so sensitive to minor imbalances between energy demand and supply.
- Meeting growth targets will be easier than meeting climate targets. It remains to be seen whether growth targets and climate targets can be disentangled.
- For the transition to our World in 2050 to be smooth, governments will have to work together and be pre-emptive in driving change, before the commodity crunch really begins to bite.
Source: http://business.financialpost.com/2011/04/01/oil-may-run-out-by-2060-hsbc/
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