BP is definitely not OPEC. Its pronouncements carry weight, coming from a global industry major and not the producers. The energy fraternity keenly awaits its annual “Statistical Review of World Energy.” There is not much skepticism associated with it, as unfortunately is the case with some major OPEC intellectual initiatives.
The recently presented review that highlights the currents trends in the industry is an interesting document. The review seconds a number of major issues afflicting the industry that are often raised by OPEC.
The just released review also underlines what OPEC has been insisting for years now.
“Our data confirm that the world has enough proven reserves of oil, natural gas and coal to meet the world’s needs for decades to come,” says the review.
This was indeed music to ears, especially since coming from a Western oil major.
“The challenges the world faces in growing supplies to meet future demand are not below ground, they are above ground. They are human, not geological,” argued Tony Hayward, BP’s group chief in an introduction to the “Statistical Review of World Energy.” Here he sounded very much like an OPEC man, as this is what the producers have been stressing for years now.
Worldwide proven oil reserves, excluding the controversial Canadian tar sands, stand at 1.26 trillion barrels, enough for another 42 years of production at last year’s rates. There is thus enough gas for another 60 years and enough coal for another 122 years, the BP report underlined.
And this is despite the fact that the world’s proven oil reserves fell in 2008, the first drop in a decade, as per the BP statistics. The proven global reserve of 1.258 trillion barrels in 2008 was three billion barrels less than in 2007, the BP report estimated. Interestingly the review also highlighted another trend-of the changing center of gravity in global energy markets- tilting “sharply and irreversibly toward the emerging nations of the world, especially China.”
Global oil demand was also reported to have dropped for the first time in 15 years in 2008, falling at its sharpest rate since 1982. This is worth noting. Though the US continues to be the world’s most energy-hungry nation, gobbling a whopping 20.4 percent, the US demand is reported by BP to have gone down by 2.8 percent last year-the biggest contraction for a quarter of a century. Meanwhile, Chinese energy usage has shot up by 7.2 percent, albeit at the slowest rate in five years yet still enough to take its share to17.7 percent. No other country is in double figures.
And thus despite the fall in global oil consumption by 420,000 barrels per day (bpd) last year — the biggest since 1982 — crude demand in China and the developing world for the first time exceeded the combined use in the rich industrialized, OECD, economies.
This is a development that, for various reasons, is expected to grow further in the coming years, highlighting the changing dynamics of the world in many respects. And this is what the report has continued to underscore. After all energy consumption is associated with higher standard of living of the population too.
With the world currently obsessed with alternatives, for a host of reasons and most importantly the geopolitical considerations, the review also highlighted the growing emphasis on alternative sources of energy.
Global consumption of coal reportedly rose by a below-average 3.1 percent, but still coal was the fastest-growing fuel-for the sixth year in a row. China’s coal consumption rose by 6.8 percent-accounting for most of the 85 percent of total global growth, indicating the emphasis in China on building coal fired power stations. Nuclear output fell by 0.7 percent, hit by a 10-percent drop in Japanese nuclear production due to an earthquake in 2007. Global hydroelectric generation grew by 2.8 percent, with China setting the pace with a 20.3 percent increase. Global solar energy capacity rose by 69 percent and wind power capacity rose 30 percent. It was also reported that the United States surpassed Germany as the wind energy leader for the first time in history, with a 49.5 percent increase in 2008.
BP strongly felt oil is set to remain volatile in the short term, as world energy supply outstrips consumption.
The report also underlined the centrality of the issue of “fair price” to future scenarios. Seconding the OPEC line of thinking, the BP annual report argued that $60-$90 per barrel was the right range for oil because it would support investment in new supply without destroying demand.
“There is a rational argument to say that somewhere between $60 to $90 a barrel (for crude) is the right sort of level,” Hayward emphasized.
And this is what the Saudi leadership has been vocal about in the recent months and now even a Western oil majors seems and admits that as important variable in the global energy balance. After all there is a point in the argument, one could argue now with more ammunition at disposal.
With the BP underlining there was enough oil beneath the surface to meet the global crude needs, one could definitely be more confident and reassured of the future of this crude driven civilization. Peak Oil proponents need to review mathematics rather closely.
