Changing the Oil Economy

1. Changing the Oil Economy State of the World Worldwatch Institute

2. The Oil Economy • Strategic commodity • Economic security • Civil security • Climate security • Alternatives The Oil Age fueled the 20th Century How does it affect global security? Courtesy Elmendorf AFB

3. Oil in Modern Life • Cars and power plants • Personal care products, cosmetics and drugs • CDs, cell phones, radios, cameras, TVs • Clothing, sports, household furnishings • Food production and transport How wide spread is our oil-based culture?

4. A Strategic Commodity • Oil is central to modern civilization • It is the world’s largest source of energy • Oil has changed from an asset to a liability • Oil is key to manufacturing, feedstock and energy and there are no ready substitutes • Oil dominates world energy budgets • Per capita and total energy consumption skyrocketed once fossil fuels became widely available

5. From Wood to Oil U.S. Consumption, 1630-2000 Quadrillion Btu Petroleum Natural Gas Nuclear Electric Power Hydroelectric Power Coal Wood Source: DOE

6. Consumption World Oil Consumption, 1950-2004 Source: BP

7. China China exported oil in the early 90’s Today, it is the world’s second largest importer Consumption Production Source: DOE

8. Consumption • Global consumption of useful energy per person is about 13 times higher than in pre-industrial times • Per capita consumption is much higher in industrial than developing nations • Consumption has risen despite increasing pollution, emissions and other problems © USDA

9. Transportation The world’s automobile fleet grew from 53 million in 1950 to 539 million in 2003 China, with an expanding economy, now has 20 million cars and trucks and by 2020 is projected to have a fleet of 120 million Oil accounts for nearly all transportation energy use Automobiles Digital Vision

10. Transportation Air travel has increased dramatically since jets were introduced 1950: 28 billion passenger-km 2002: 2,942 billion passenger-km Air Travel © NASA

11. Supply • Conventional view--production will keep rising • IEA projects production will reach 121 million barrels per day • Sufficient oil reserves exist and new technologies will aid in better extraction © DOE

12. A Finite Resource • Dissident view--production will begin to decline by 2007 • Gap between supply and demand will continue to grow • New technologies will only accelerate rate of depletion • Production has outrun discovery for past three decades © Getty Images

13. Discoveries Discoveries Production World oil discoveries are lagging far behind production 60 50 40 30 Billion Barrels 20 10 0 1920 1940 1960 1980 2000 2020

14. Production & Resources Estimated Resources According to many geologists, resource constraints may soon limit world oil production 30 25 Historical Production 20 Billion Barrels 15 10 5 0 1500 1700 1900 2100 2300 2500 Source: DOD, DOE

15. Falling Production 6 of OPEC’s 11 members United Kingdom Indonesia Norway Mexico Venezuela Production has reached a plateau or declined in 33 of the 48 largest producers, including: © Getty Images

16. Oil Production Production Per Day Former Soviet Union United States Saudi Arabia Source: BP

17. U.S. Production U.S. oil production peaked in 1971 Million Barrels Per Day Lower 48 states Alaska Source: DOE

18. Dependency • Industrial nations use most of the world’s oil • Developing nations • Are more dependent on oil as share of total energy use • Use more in proportion to the size of their economies • Many import virtually all their oil • Are more vulnerable to price shocks than many industrial nations

19. Dependency Percent of Oil in Energy Budgets Ecuador Thailand Japan U.S. France

20. Paying the Price Two decades of stable oil prices have abruptly ended. Is this a temporary anomaly? Dollars Per Barrel

21. Human Cost Price increases translate into human cost in poor countries rising food costs affect diets cooking fuel becomes less affordable © FAO © UN

22. Price and Economic Growth IEA estimates that if the price per barrel price increase is sustained, it will reduce economic growth throughout the world in 2006 Percent Reduction in Economic Growth U.S. 1.0 Europe 1.6 India 3.2 Indebted countries 5.1

23. World Oil Trade, 2002 Exports, MBD < 1 1-2 2-4 5-6 6-9

24. World Oil Trade, 2020 Exports, MBD < 1 1-2 2-4 5-6 6-9 Trillion Ton-Miles 5.6 8.8 8.3 6.3 7.1 8.8 12.9

25. Exporter Dependency • Exporters rely on a continuous stream of oil revenues because their economies are not diversified • Oil income is often diverted to enrich elites and to pay for military buildup © Getty Images

26. Uncertainty Growing demand will increase dependence on supplies from the Middle East Oil-producing countries are often politically unstable True state of reserves in Persian Gulf, particularly Saudi Arabia, are in question • Countries such as China and India are entering into oil-intensive development and will intensify competition for oil • Competition will trigger soaring prices

27. Oil and Civil Society • Access to oil has provoked power maneuvering, military interventionism, and alliances of convenience • Oil resource wealth has tended to support corruption and conflict rather than growth and development © Lance Cpl. Nathan Alan Heusdens

28. Oil and Climate Global consensus that Earth is warming and that deforestation and the burning of fossil fuels are the major causes of climate change Digital Vision Oil contributes 42% of all emissions of carbon dioxide (CO2) emissions, a greenhouse gas

29. Greenhouse Gas Atmospheric concentration of carbon dioxide is now higher than at any time in the last 650,000 years Parts Per Million Source: Scripps Institute of Oceanography

30. Greenhouse Gas Past and future CO2 concentration Source: IPCC

31. Climate Change Scientists project that rising temperatures will: • melt ice caps and glaciers, raise sea levels, and increase storm severity • trigger regional droughts and famines • lead to the spread of diseases like malaria and dengue fever • affect the growth and harvest of world food crops Glaciers are already melting

32. Temperature Changes The global average temperature is already higher than at any time since the Middle Ages Source: Goddard Institute for Space Studies (GISS)

33. Climate Security Environmental effects from climate change threaten human security and the global economy • Global increase in poverty • National and regional instability • Tightened food supplies • Conflict over water resources © Digital Vision © UN

34. Weather Disasters The economic cost of weather-related catastrophes Billion Dollars Uninsured Losses Insured Losses Source: Munich Re

35. The Tipping Point We may already be in the early stages of a global energy transition… One that is as profound as the advent of the oil age was a century ago.

36. The Tipping Point Oil (1905) Renewable Energy (2005)

37. Improving Efficiency Improving automobile fuel economy can make an enormous difference Gasoline and diesel-electric hybrid cars are twice as efficient as internal combustion engines

38. Renewable Energy Wind- and solar- generated electricity are the fastest growing sources of energy in the world Biomass fuels such as ethanol and biodiesel are proven and competitive with gasoline and diesel

39. Wind Wind energy is becoming a major part of the global power industry 60,000 50,000 40,000 Megawatts 30,000 20,000 10,000 0 1980 1985 1990 1995 2000 2005 Source: BTM Consult, EWEA, AWEA, Windpower Monthly and New Energy

40. Solar Solar energy is growing even faster 5000 4000 3000 Megawatts 2000 1000 0 1980 1985 1990 1995 2000 2005 Source: PV Energy Systems, PV News

41. Biofuels • Biofuels are joining the bandwagon 35,000 30,000 25,000 Million Liters 20,000 15,000 10,000 5,000 0 1980 1985 1990 1995 2000 2005

42. Policy Changes • Ensure that energy markets include renewable options • Enact pricing laws to guarantee fixed minimum prices for electricity • Require that utilities provide access to grids • Establish quota systems mandating a share for renewables

43. Policy Changes • Focus on industry standards, permits and building codes • Ensure quality hardware • Address public concerns about siting • Design new buildings to be compatible with renewables

44. Policy Changes • Educate investors and consumers • Ensure a skilled workforce • Increase public participation

45. Choices World Energy Use % 2004 Oil Hydro Coal Nuclear Natural Gas Other Renewables Traditional Biomass Source: Martinot, BP

46. Choices World Energy Growth (2002-2004) Annual Percent Growth Rate Hydro Oil Coal Wind Gas Biofuels Nuclear Solar PV Traditional Biomass Source: Martinot, BP

47. What do you choose? One path leads to the possible calamitous loss of a prime energy source The other path leads toward a world of abundant clean energy for more of the world’s people

48. Worldwatch Institute Further information and references for the material in this presentation are available in the Worldwatch Institute’s publication “State of the World 2005” This presentation is based on a chapter authored by: Thomas Prugh, Christopher Flavin, and Janet L. Sawin www.worldwatch.org