"Energy, Economic and Environmental Security"
Transcript of "Energy, Economic and Environmental Security"
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A Global Perspective onEnergy Markets and Economic Integration
Presented to the:Association for University Businessand Economic Research (AUBER)
“59th Annual AUBER Fall Conference: Energizing the Economy”October 9, 2005
Presented by:Dr. Arnold B. Baker
President, International Association for Energy EconomicsChief Economist, Sandia National LaboratoriesPhone: 505-284-4462 Fax: 505-844-3296
Email: [email protected] is a multiprogram laboratory operated by Sandia Corporation, a Lockheed Martin Company,
for the United States Department of Energy under contract DE-AC04-94AL85000.
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Economic Prosperity and Stability Require Access to Reliable and Affordable Energy
Source: Royal Dutch Shell, “Exploring the Future – Energy Needs, Choices and Possibilities”
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Oil Prices (1890 - 2004)
0
10
20
30
40
50
60
70
80
90
100
1861
1881
1901
1921
1941
1961
1981
2001
Do
llars
per
barr
el
($2004
)
Real Oil Prices Have Varied Considerably and Affect Economic Well Being
Source: BP Statistical Review of World Energy June 2005
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Future Oil Price Expectations are Driven by Recent History
$2002 US/Barrel
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While Oil’s Share of GDP Declined Since1973 It May Becoming More Important (US)
Paul Sarkey, A Scratched Record: Oil Price Upgrade, DeutscheBank, July 11, 2005
Real Oil Prices and Oil’s Share of US GDP
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Over the Near to Medium Term, Oil and Gas Markets Face Many Uncertainties
What will be the effect of
• Iraqi Domestic instability on Iraqi oil production
• Negotiations surrounding Iranian nuclear technology on Iranian oil supplies
• Saudi commitment to expanded oil production
• President Putin’s policies on Russian oil and natural gas supplies
• President Chavez’s policies on Venezuelan oil supplies
• Higher oil prices on world economic growth
– Effect of economic growth on oil demand in China, India, U.S., etc.
• Higher oil prices on non-OPEC oil supplies
• Katrina’s impact on crude and refined products
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Over the Longer Term, World Energy Demand and Carbon Emissions
will Grow Over 40 Percent
Energy DemandEnergy Demand Carbon Dioxide Carbon Dioxide EmissionsEmissions
and Developing Countries will Account for 70 % of the Increase
Source: USDOE EIA IEO 2004 Reference Case
Oil
Natural Gas
Coal
NuclearOther
0
100
200
300
400
500
600
700
2005 2010 2015 2020 2025
Qua
drill
ion
BTU
s
Developed
Developing
0
5
10
15
20
25
30
35
40
2005 2010 2015 2020 2025
Bill
ion
Met
ric
Tons
Car
bon
Dio
xide
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The Climate ChangePolicy Problem is Enormous
• The theoretical climate change relationship is between
atmospheric concentrations of GHG and climate change, not
annual emissions
• According to the Intergovernmental Panel on Climate
Change, stabilizing atmospheric concentration of GHG at
current levels would require permanent emissions reductions
of 60% or more below current levels– Kyoto Protocols: Industrialized countries agreed to reduce
emissions, on average, 5.2% from 1990 levels by 2008-2012
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Current Fossil Alternatives areHydro/Renewables and Nuclear,
with Carbon Sequestration being Explored
Source: USDOE EIA IEO 2004 Reference Case
World Energy Demand
0
100
200
300
400
500
600
700
2005 2025
QU
AD
S
Hydro/Renewables
Fossil
Nuclear
Fossil
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Carbon Sequestration Technologies will Add Costs to Fossil Fuels
0
10
20
30
40
50
60
70
80
Integrated GasificationCombined Cycle
Pulverized Coal
$ /
ton
CO
2 A
void
ed
21 20
12
5
22
-20
-10
0
10
20
30
40
50
Enhanced OilRecovery
EnhancedCoalbedMethaneRecovery
DepletedGas
ReservoirBase
Depleted OilReservoir
Base
Deep SalineAquifer
Disposal Method
$/ t
CO
2 A
void
ed
Transport & DisposalCaptureTotal
Using Integrated GasificationCombined Cycle
Capture Cost Ranges
Source: David, 2000
Sources: Heddle et al., 2003.
$25/Ton CO2 = About $13/bbl Oil
CO2 Seq. < $3/Ton CO2 (2015) USDOE Program Target
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Over the Longer Term, Electricity Demand will Grow Almost 60%
and Developing Countries will Account for 2/3 of the Increase
Source: USDOE EIA IEO 2004 Reference Case
0
5
10
15
20
25
2005 2025
Tri
llio
n k
Wh
US
OtherInd
EE/FSU
Other Developing
China
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Current Renewable Electricityis Largely Hydro
02468
101214161820
2000
Pe
rce
nt
of
Wo
rld
Ele
ctr
icit
y
Pro
du
cti
on
(2
00
0)
Hydro
Combustible & Waste
Other
1%
17%
1%
Solar
Wind
Geothermal
Etc.
Source: Renewable Information 2002, IEA
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Nuclear Contributes toElectric Power in Many Countries
0
10
20
30
40
50
60
70
80
90
100
Arg
entin
aA
rmen
iaB
elgi
umB
razi
lB
ulga
riaC
anad
aC
hina
Tai
wan
Cze
ch R
epF
inla
ndF
ranc
eG
erm
any
Hun
gary
Indi
aJa
pan
Kaz
akhs
taK
orea
, S
Lith
uani
aM
exic
oN
ethe
rland
Pak
ista
nR
oman
iaR
ussi
aS
lova
kia
Slo
veni
aS
outh
Af.
Spa
inS
wed
enS
witz
erla
nd UK
Ukr
aine
US
A
(Source: WNA, 2004)
Percent Share 2003
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New Nuclear Electricity Plants are Cost Competitive in US,
Depending on Capital Cost and Perceived Risk
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Dependence on Oil and Gas Tradewill Grow Considerably
0
1 000
2 000
3 000
4 000
5 000
6 000
Mto
e
2002 2030 2002 2030 2002 2030
Domestic consumption Traded between regions
Oil CoalGas
14%
15%46%
63%
15%
26%
Trade as % of world demand
0
1 000
2 000
3 000
4 000
5 000
6 000
Mto
e
2002 2030 2002 2030 2002 2030
Domestic consumption Traded between regions
Oil CoalGas
14%
15%46%
63%
15%
26%
Trade as % of world demand
Source: World Energy Outlook 2004, IEA
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0
5
10
15
20
25
2005 2010 2015 2020 2025
US Oil Production will Stabilize,While Net Imports will Grow 60%
Petroleum Production
Petroleum Product Imports
Crude Oil Imports
Source: DOE/EIA AEO2005
MM
B/D
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0.0
5.0
10.0
15.0
20.0
25.0
2005 2010 2015 2020 2025
US Natural Gas Production will Grow 13% Imports will Grow 157%
Other Imports
Production
Source: DOE/EIA AEO2005
TC
F
LNG Imports
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0
20
40
60
80
100
120
140
Qu
ad
rilli
on
BT
Us
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
US Energy Use Will Grow 31% by 2025
Fuel share 2005 2025Oil 40% 41%Natural Gas 22% 24%Coal 23% 23%Nuclear Power 8% 7%Renewables / Hydro 6% 6%
Source: DOE/EIA AEO2005
Oil
Renewables /HydroNuclear
Coal
Natural Gas
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0
1000
2000
3000
4000
5000
6000
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
20
21
20
23
20
25
US Electricity Generation will Grow By 42%
Coal
Nuclear
Natural Gas
Renewables
Source: DOE/EIA AEO2005
Oil
Bil
lio
n k
Wh
Fuel share 2005 2025Coal 54% 54%Oil 3% 2%Natural Gas 12% 20%Nuclear 21% 16%Renewables 10% 8%
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World Conventional Proved Fossil Fuel Reserves are Geographically Concentrated
100100100Total
382621ROW
9**India
2532U.S.
1212China
*25Venezuela
16286Russia
0152Qatar
036UAE
0110Kuwait
*1510Iran
0211Iraq
0425Saudi
*4064Key P.G.
CoalGasOilRegion
Sou
rce:
EIA
200
3. E
xclu
des
Oil
San
ds. *
Les
s th
an 0
.4 %
(Percent Share)
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A Wide Range of Prospects for Alternative Liquid Fuels, But will Take Time to Develop
0
10
20
30
40
50
60
70
80
Wor
ld O
il Pric
e
Saudi O
il
U.S. O
il
Canadian
Tar San
ds
Qat
ar G
TL
China
CTL
S. Afri
ca C
TL
Brazilia
n Eth
anol
Oil S
hale
$/b
bl
Illustrative Oil Production Costs
Illustrative Alternative Fuel Production Costs
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National Economies are BecomingIncreasingly Intertwined
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10
20
30
40
50
60
World LowIncome
MiddleIncome
Low &middleincome
HighIncome
Per
cen
t
1990
2002
Source: The World Bank, 2004.
0
5
10
15
20
25
World LowIncome
MiddleIncome
Low &middleincome
HighIncome
Per
cen
t 1990
2002
Trade in Goods (% of GDP)
Gross Private Capital Flows(% of GDP)
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So are Manufacturing Processes
Source: Wall Street Journal, June 9, 2005, p. B1
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And Even Universities
Source: Wall Street Journal, July 12, 2005, p. B1
Study Abroad - Singapore has courted top-tier schools:• 1998: French business school INSEAD
– Offers MBA, executive education
• 2000: University of Chicago– Graduate School of Business opens a Singapore campus
• 2003: Johns Hopkins Singapore– Operates as a full division of the university
• 2003: Duke– Medical school agrees to open a school at the National University
of Singapore
• 2005: MIT– Grants engineering master’s degrees in a joint venture with two
Singaporean universities
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And this Trend Toward Interdependency will Accelerate
• The Internet and silicon revolution will continue to break
down communication and economic barriers
– Greater numbers of countries will participate in the world
economy and financial markets
– Integrated supply chain logistics of service & manufacturing
industries will seamlessly cross national borders
• As will distance education and technology transfer
• Both global economic competition and global economic
cooperation will intensify
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And this Trend Toward Interdependency will Accelerate (continued)
• Scope for national public policies with major economic
impact will become more limited
– Can’t afford to have costs out of line with competitor countries
– Growing need to send domestic energy consumers and
producers consistent market signals, and to integrate domestic
energy security, environmental and economic objectives and
polices
– Driven toward greater policy and regulatory harmonization
(lowest common denominator?)
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And this Trend Toward Interdependency will Accelerate (continued)
• Supply and demand shocks will be transmitted more
rapidly
Country Global Market Country
• Science and technology developments will accelerate
and transcend high tech national borders
– But they are unlikely to “solve” energy and environmental
problems any time soon
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Some Governments and Car Companies are Aiming for a Hydrogen Economy
• Hydrogen may solve many problems:
– Lowered, or even zero, carbon emissions– Energy security– Limited fossil fuels and uneven distribution
Source: Fuelcell.org
Source: GM
• Many hurdles to overcome:
– Lifetime of fuel cell– Economic hydrogen production– Lack of hydrogen infrastructure– Sequestration of carbon if
hydrogen derived from fossil
fuels– Unlikely to be cost competitive
until at least mid 2020s
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Over Several Decades, Advanced Energy Technologies
could “Disrupt” the Current System
• Nanotechnology has the potential to fundamentally change energy supply and demand
Lauren Rowher, SNL
• Examples:
– Solid State Lighting Using “Quantum Dots” could cut power for lighting use by 50%
– Ultra-high strength lightweight nanophase materials could improve car, airplane efficiency
– Nanoparticles and Nanoarchitectures for Energy Conversion and Storage may offer solutions to low cost fuel cells and batteries
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Conclusions
• Over the nearer term– Many uncertainties in oil and natural gas markets remain
• Over the longer term– The world economy and its energy markets will become
increasingly integrated and interdependent
– Energy use and carbon emissions will grow substantially, driven by the developing world, and mostly fueled by fossil energy
– The potential for oil and natural gas supply shocks will grow, as will the economic transmission of those shocks
– Oil and natural gas price instability will increase
– Major new energy technology platforms that transform economies and energy could emerge
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Conclusions (continued)
• At the same time
– Both economic competition and cooperation will intensify
– Scope for national public policies with major economic impact
will become increasingly limited
– Need for clear domestic consumer-producer energy price signals
and consistent energy security, environmental and economic
objectives and policies will grow
– Pressure for policy and regulatory harmonization will increase,
as will requirements for decision-making speed, and the cost of
mistakes will grow
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Conclusions (continued)
• International flexibility, cooperation and partnering on
many fronts, including public policy and science &
technology investment, will be critical to
– Avoid bumps in the road
– Support national political economic security
– Improve the health and well being of the developing world
– Provide a foundation for global and regional prosperity and
environmental sustainability