November 22, 2005 9:32 AM PST

Facing oil's expensive future

DOHA, Qatar--It's going to get tougher and more expensive to keep the lights on in the next 25 years.

The price of oil will rise dramatically--from an expected $46 a barrel in 2010 to $74 a barrel in 2030--in part because of a projected doubling of demand, said Fatih Birol, the chief economist for the International Energy Agency, speaking at the International Petroleum Technology Conference here. And that's only if oil producers invest heavily in new refining technologies, novel fuels and extraction techniques.

Without intense investment, oil prices could rise 32 percent more by 2030.

"We shouldn't expect too much of a decline in oil prices," he said. "Forty-six dollars is actually much higher than our earlier estimates."

The amount of greenhouse gases pumped in the atmosphere will also likely rise. Solar and other alternative energy technologies could reduce this, but the amount of carbon dioxide will still be far higher than it was in 1990, he predicted.

This somewhat ominous picture comes courtesy of a confluence of forces. China, India and other emerging nations have increased demand for oil and natural gas. Cars are a major part of the picture too. Although power plants and other formerly oil-burning facilities have begun to phase out oil in favor of cleaner alternatives, oil remains the fuel of choice for moving vehicles.

"Almost all of the growth in the last four years comes from the transportation sector. That is different than the last 20 years," he said. "It is very difficult to substitute other fuels in transportation."

By 2030, demand will likely hit 121 million barrels of oil a day. Now, the world consumes about 80 million barrels a day. Back in 1990, the world consumed 66 million barrels a day and in 1970 only 50 million barrels a day. (Oil today sells for around $57 a barrel, lower than the 2010 projection, but lower than recent highs.)

The increase in demand, naturally, will raise revenues for oil producers and oil producing nations. Energy exports, which include oil but also things like natural gas, from the Middle East will go from $313 billion in 2004 to $636 billion.

The increase in sales, however, will also require sinking money into capital expansion and research and development. Auto manufacturers, for instance, are building engines that require cleaner, lighter fuels.

Unfortunately, the supply coming out of the ground is more sulfurous. As a result, it will have to be more finely refined. Oil producers will have to invest $180 billion in refinery capabilities to keep up, Birol said.

The investment contingency
Overall, energy providers will have to invest $1.5 trillion, or $56 billion a year, over the next 25 years to keep up with overall energy demands, he predicted.

The levels of investment will directly impact the market shares of various companies and regions. If the expected levels of investment are met, the Middle East as a whole will see its percentage of the oil market rise from 35 percent today to 44 percent in 2030. The increase comes because the region has larger proven reserves than the rest of the world.

If the nations and companies in the region do not make the required investments, choosing to preserve resources for future generations, the region's market share will drop from 35 percent to 33 percent, Birol said. "Gross Domestic Product in the region will drop," he said.

While oil has been the mainstay of the energy industry for several decades, natural gas will gain in importance. Several industries have converted to using it and research is being conducted see how it can be used to run more automobiles.

Increased demand in gas will favor Qatar, which has about 25 percent of the global gas trade and the world's largest reserves, along with No. 2 Algeria and No. 3 Iran.

Middle East gas exports will increase by four times by 2030, he said.


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Head in the sand, floating down that river in Egypt...
"oil prices could rise 32 percent more by 2030"

I think they're off by at least an order of magnitude! Try 320%

Once we've passed the peak, supply will decline from 3% to 7%
annually -- that means it will double in price every 10 to 20

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Posted by Bytesmiths (104 comments )
Reply Link Flag
RE: Head in the sand
32% is off but $180 maybe too high too. I think you're closer than their $80 mark.
It's true all fossil fuels will run out. Hubbert peak theory has been used on all of them. He was off by one year for the United State's peak, not use on production. The theory was off by 4 years and 10GB/yr for the world production.
The cost of retrieving gasoline will go up, that will keep the price at a higher level. The oil- sands project in Canada can make money at $20 dollars a barrel. The reserve there is in the trillion of barrels. Was the oil-sands included in the the oil output projections? Now the U.S. government opened up the oil-shall deposits in the west again another trillion barrels. Are they included? Again not sure. If they are not than that's over 60 years of consumption at 80 million barrels a day.

With higher prices for gasoline, alternatives energies are a economic option. Wind power is in the ball park for electricity to sell to the public. Gasoline at $80 a barrel wind energy will make a profit and so will solar. It may mean more electric cars in the future. After all the consumers habits will change with higher prices too. Consumers overall consumption will change. Just look what happen to the SUV market last summer when gas hit $3.00 a gallon at the pump. The price of gas increased to a point which the consumer chose to buy autos with better gas mileage. The future will be cars with better gas mileage or electric. This will decrease consumption per individual, which could stablize the price for going through the roof. It happen in the 70's, the consumer ditch the "boats" (the huge cars of the day)for smaller more efficient cars. Today there are more efficient designs in alternative energies. Sooner or later alternatives energies will have the economies of scale on there side. Remember that BP is the largest solar company. This is not by accidented they are planning for the a greener future. Because there will be money it. The world consumer's will change to a more greener energy solution because it will cost them less out of there pocket book.

Evan with gasoline at higher price it will not demand as much of your spendable income. Unless you choose to make it so.
Posted by pmm6 (11 comments )
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Do economists not have to take Economics anymore?
It's called the rule of 72: given a certain rate of growth (in this case, natural inflation), you can expect the price of something to double in 72/i periods. If inflation is 4% per year, 18 years is our expected doubling period. Less inflation and that time period becomes longer.

32% price inflation in 25 years for something that should be 238% is quite a bargain. If that isn't a price drop, I don't know what is.
Posted by Christopher Hall (1205 comments )
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The smarter folks will use hydrogen
The first carmaker that puts a hydrogen powered wehicle in serial production will be the big winner in business, that's 4 sure! There will be a strong gasoline resistance by people everywhere.
This human factor should not to be excluded from the drawing table. There are more and more folks who care about what they breed!
Posted by cyberblatt (35 comments )
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Hydrogen car
Hi, well I know that you mean well with that comment but have you ever worked with hydrogen? It burns with a colorless, odorless flame that is invisible and VERY hot. Not only that, it is the smallest molecule and is extremely hard to contain, it will leak out in places where you would never think to look. To use hydrogen in a car will be doable but at great risk and expense. It would be much better to build more plants to produce ethanol from waste material like they have done in Brazil (rather than from expensive to grow corn), I understand that about 85 percent of the cars there run on pure ethanol. No big deal as far as manufacturing the car, storing and shipping and using the fuel. As long as the big oil companies are friends with people like the crooks we now have in D.C. we will never see either ethanol or hydrogen powering cars.
Posted by tmccarty8 (11 comments )
Link Flag
Hydrogen's nice and all, but...
One thing nobody seems willing to talk about when it comes to alternative fuels is the cost. Barring new production processes, hydrogen is nearly prohibitively expensive to produce in a form pure enough to be useful towards a mechanical process. The technology simply isn't ready. That's not to say that it won't be sometime in the near future, but right now, it's nothing more than a fantasy. Further, while hydrogen produces about the same energy release as gasoline, volume-to-volume, the average consumer cost is three times higher. And you thought people complained about paying $2.50 for gas in the US?

While the discussion may be politically robust, the economic and social impacts are often left by the wayside.
Posted by Christopher Hall (1205 comments )
Link Flag
all the demons that oil drags along
will multiply as well. the US will make more mortal enemies, climate change will intensify weather-driven natural disasters, and our lifestyles will become even more dependent on energy
Posted by chomprock (6 comments )
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