The just-released 2005 edition of the IEA’s World Energy Outlook (WEO 2005) projects world energy demand to increase by more than 50% between now and 2030, assuming policies remain unchanged.
Although the IEA estimates world energy resources are adequate to meet this demand, the implications of the investment required and the rise in CO2 emissions (52% higher than today), lead to “a future that is not sustainable,” according to William C. Ramsay, Deputy Executive Director of the IEA.
These projected trends have important implications and lead to a future that is not sustainable—from an energy-security or environmental perspective. We must change these outcomes and get the planet onto a sustainable energy path.—William C. Ramsay
WEO 2005 focuses closely on the Middle East and North Africa (MENA) region. In the MENA region, domestic energy demand is driven by surging populations, economic growth and heavy energy subsidies. Primary energy demand more than doubles by 2030.
At the same time, MENA oil production will increase, according to the IEA, by 75% by 2030 and natural gas production will treble, allowing more gas exports. The region’s share in global oil production will increase from 35% today to 44% in 2030. However, this means the countries of the Middle East and North Africa would need to invest, on average, $56 billion per year in energy infrastructure. The level of upstream oil investment required will be more than twice that of the last decade.
WEO 2005 also develops two other scenarios, each of them far from unlikely: a Deferred Investment Scenario, in which investment in the producing countries is delayed, whether deliberately or inadvertently; and a World Alternative Policy Scenario, in which energy-importing countries take determined action to cut demand and change the pattern of fuel use, driven by high prices, environmental or security goals, or all three.
The two scenarios have significant implications for MENA countries. In the Deferred Investment Scenario, energy prices rise sharply. Global energy-demand growth falls, cutting the region’s oil and gas export revenues by more than $1 trillion from 2004-2030. World GDP growth slows down. Deferred investment could be the result of many factors, but whatever the cause, the results are higher prices, greater uncertainty and market inefficiencies.
Under the WEO World Alternative Policy Scenario, global oil and gas demand growth is lower, but the world continues to rely heavily on MENA oil and gas. CO2 emissions fall 16% below the level of the Reference Scenario—but still increase around 30% by 2030.
The IEA revised its assumptions about future international energy prices “significantly upwards” in WEO-2005 as a result of changed market expectations after years of underinvestment in oil production and the refinery sector.
In the IEA Reference Scenario, the agency assumes the price of oil eases to around $35 per barrel in 2010 (in year-2004 dollars) as new crude oil production and refining capacity comes on stream. It is then assumed to rise slowly, to near $39 in 2030. In the Deferred Investment Scenario the oil price reaches $52 in 2030.