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6 Nov 15 2012 @ 10:55am by Matt Smith in Blog, Crude Oil, Economy, energy consulting, Global Energy, Natural Gas, risk management, Risk Strategy

Projections Proffered By The IEA

The IEA’s 2012 World Energy Outlook has spurned many a headline since its release on Monday, which should be none too surprising given it is 688 pages long. The executive summary of the report can be viewed here (which is 676 pages less than the full version), while through even more distillation here are ten points I have gleaned from it in the past few days:  

1) The number of vehicles on the road is set to double to 1.7 billion by 2035. Increasing demand for road freight is responsible for almost 40% of the increase in global oil demand

2) US oil production is set to surpass that of Saudi Arabia by 2020 to become the largest global oil producer (caveat: this will only likely be until the mid-2020s, when Saudi takes back this accolade)

3) Natural gas is set to become the most widely-used fuel in the US by 2030. Here is the current breakdown, courtesy of the EIA’s latest Annual Energy Review:

4) Renewable energy is to soar by 2035, accounting for almost one third of total electricity output. Renewables are set to become the second-largest source of power generation in 2015, led by hydropower, and are set to approach a similar level to coal (= the largest source) by 2035. There will be 26 times more generation from solar power by 2035, but it will still only account for 2% of total generation

5) Iraq is to make the largest contribution to global oil supply growth as oil output exceeds 6 mbpd in 2020, rising to above 8 mbpd in 2035. China is set to be the biggest beneficiary of this increase, becoming their main buyer by 2030, while Iraq becomes the second largest global oil exporter, surpassing Russia. This report on Iraq from the IEA last month shows its oil growth projection put in context:

6) Global fossil fuel subsidies increased 30% in 2011 to $523 billion. Global fossil fuel subsidies are six times greater than those for renewables (at $88 billon)

7) Nearly three-quarters of projected non-OECD coal demand growth comes from China and India, with India surpassing the US by 2025 as the world’s second largest user of coal (behind China), while becoming the largest importer of coal by 2020. OECD demand for coal is expected to decline going forward

8)  Water shortages are the key constraint on power and energy. Piggy-backing on last week’s burrito post about China’s water scarcity comes this nifty chart from the IEA, highlighting the vulnerability of various regions. 23% of China’s water is consumed by industry, most of which is involved in coal production. The chart below shows coal producers in relation to water vulnerability:

9) The US is predicted to become a net exporter of oil by 2035, although there is a good amount of skepticism surrounding this prediction. (and some general scoffing by peak oil theorists)

10) Global energy demand is set to grow by a third by 2035, with China, India, and the Middle East accounting for 60% of the increase. Energy demand in the developed countries (= OECD) barley rises

I hope these points were useful. I would like to close, however, with a word of caution: that these are merely projections, and should be used as reference points and to identify trends, rather than for hard and fast targets. As one analyst has said in the aftermath of the report, beware!

6 Comments on this post:

  1. Daniel says:

    Great summary. I think they are optimistic on Iraq and US supply, but definitely too optimistic on oil demand globally. As per renewable subsidies, if you put them in Kwh vs US$ renewables are 5c/Kwh produced versus fossil at 1/Kwh :)

  2. Subsidy Eye says:

    I think you mean spawned many a headline, not spurned.

  3. Matt Smith says:

    Thanks Daniel, very interesting re renewables costs.

    Subsidy Eye – grrr, good spot. I had a funny feeling was not right with spurned. Thanks!

  4. Chris Rogers says:

    Can you please provide breakdown of renewable and fossil fuel subsidies as I repeatedly find myself in discussions about this. Also, are you aware of a resource that tallies the externalities associated with each energy source? Keep up the good work!

  5. Matt Smith says:

    Chris – I had researched and drafted a post on 2010 fossil fuel subsidies when I learned the IEA would be releasing 2011 data…. imagine my frustration!

    The latest data isn’t freely available from the IEA yet, but a report on the 2010 data plus other resources are here:

    Thanks for reading!!

  6. Beatriz says:

    I found my way to your website via the Friedman arlicte in the NY Times. Thanks for your work! I’m about to order the book. I find it a little difficult to believe that the politicians don’t connect the dots, at least those who claim that Climate Change is/was the greatest moral challenge of a generation’. But I don’t accept that hard nosed, economically and ecologically savvy mining executives and entrepreneurs don’t understand the stark projection laid out here. I arrived at a very similar conclusion myself without access to industry data.What I fear is, that having realized, like the tobacco industry, that their time is limited, they have decided to ride the wave of doubt for as long as it can be sustained in order to maximize their profits in the short term and to Hell with the planet. They have no intention to waste time, money and effort on CCS they know it won’t work, certainly not before 2020.They are probably shredding documents already. Oh but your Honour, if only we’d known!

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