The International Energy Agency has warned that oil demand will go up from the 2005 level of 84 million barrels per day to 99 mbd by 2015 and 116 mbd by 2030 if the world continues on its "current unsustainable path" of energy consumption.
In its just-released World Energy Outlook 2006, the agency says that over 70 per cent of the increased oil demand is attributable to developing countries.
This growth in demand, however, is likely to exert pressure on pricing only in the next decade. Of course, fresh geopolitical tensions or, worse, a major supply disruption could drive prices higher, it says.
Prices of other commodities in the energy basket like natural gas are expected to follow the trend in oil prices, while the price of coal, demand for which is being fuelled by India and China, is "assumed to change proportionately less over time, but follow the direction of oil and gas prices."
Meeting these demand projections will require a cumulative investment of $20 trillion over 2005-2030. This estimate is about $3 trillion higher than what was projected last year, because of sharp increases in capital costs, the agency says, adding that China alone needs to invest about $3.7 trillion or 18% of the world's total.
Will this investment be forthcoming? "The capacity and willingness of major oil and gas producers to step up investment to meet rising global demand are particularly uncertain," says the report.
Meanwhile, developing countries are slated to increase their share of carbon dioxide emissions from 39 per cent in 2004 to 50 per cent by 2030, when emissions will total 40 gigatonnes, with China and India leading the list.
So what needs to be done? Acceding to the request of G8 leaders, the IEA has drawn up an alternative energy scenario to significantly reduce the rate of increase in demand for energy, and emissions around the world.
Most importantly, "the economic cost of these policies would be more than outweighed by the economic benefits that would come from using and producing energy more efficiently."
Here is how. "On an average, an additional dollar invested in more efficient electrical equipment, appliances, and buildings avoids more than two dollars in investment in electricity supply," says the report.
Private sector investments should be encouraged in nuclear energy, which is extremely cost-competitive, and could play a major role in reducing carbon dioxide emissions, said the energy outlook.
