This year’s outlook has also been complicated by the tsunami in Japan and the ensuing Fukushima nuclear crisis. We don’t know what will happen to the share of nuclear power in the global energy mix. But it is clear that its future expansion is now in question.
In contrast to all this, last year’s energy map was rather uncomplicated. Toward the end of the year, the energy markets were relatively tranquil, the energy mix was expanding and the oil and gas industries faced promising scenarios.
This year, however, there is an entirely new world. Reading today’s energy map thus requires great care — and the understanding that it could change unexpectedly.
Widespread instability across the Middle East and Africa region has raised important questions about the long-term impact on upstream investments, oil and gas production and hydrocarbon exports in the region.
If the unrest continues, production and exports could continue to be affected. The temporary loss of Libya’s crude oil production, for example, put significant pressure on world oil markets. But other OPEC countries have been able to help stabilize the markets by increasing their production.
Responding to events like these — in order to ensure market balance — is precisely what the Organization of the Petroleum Exporting Countries continually strives to do. It is why OPEC remains committed to maintaining spare capacity: to provide ample supply levels during times of constraint.
There has also been a significant shift in the global economic environment. This has brought new risks for the energy industry, in general, and for oil, in particular.
Just a few months ago, at the time of OPEC’s last ministerial meeting, the global economic outlook suggested growth, as well as an increase in oil demand and a modest rise in crude prices. At the time, OPEC was thinking that the market would need 1.5 million barrels per day in extra production. But ongoing problems in the world’s largest economies have required revisions to this outlook.
Despite generous stimulus packages, the recovery in the U.S. has not turned out as expected. Continuing unemployment — and the historic downgrading of America’s debt rating — have posed significant challenges to policy makers. And in the European Union, there is a sovereign debt crisis in some countries which now threatens the stability of the world’s financial system.
All this has prompted OPEC to revise its forecasts for world economic growth. In its September Monthly Oil Market Report, expectations for global growth were revised down to 3.6 percent from 3.7 percent in 2011, and to 3.9 percent from 4 percent in 2012.
On the other hand, developing countries seem to be growing rapidly and steadily. In fact, OPEC sees the majority of global G.D.P. growth in 2011 coming from developing countries.
China, in particular, continues to grow robustly, despite some manufacturing weakness. Recent OPEC figures put its G.D.P. growth at 9 percent or more in 2011 and 8.5 percent in 2012. This translates into a growing appetite for energy.
In fact, while the outlook for the global economy is uncertain, overall energy demand — and oil, in particular — is set to increase. OPEC sees global energy demand increasing around 50 percent from 2010 to 2035, even if significant efficiency gains are assumed. Fossil fuels will continue to play a central role.
Fossil fuels offer the best prospects for meeting the world’s energy needs. They offer distinct advantages over alternative energies, due to the relative affordability of their projects and existing infrastructure. Over the next 20 years, they are seen contributing more than 83 percent to the energy mix.
Additionally, even with oil’s share seen as falling to around 30 percent from 35 percent of the global energy mix by 2030, trends suggest that its overall share will remain very strong.
The supply outlook also indicates that there is more than enough to meet demand well into the future. Estimates suggest total world crude oil and natural gas liquids resources of around 3.5 trillion barrels: 1.4 trillion in non-OPEC countries and 2.1 trillion in OPEC ones.
Production in OPEC member countries is still strong, despite recent instability in some regions, and supply levels continue to provide significant forward cover. Currently, more than 40 percent of the world’s crude oil production comes from OPEC countries — and there is still enough collective spare capacity to address market needs.
Article source: http://www.nytimes.com/2011/10/11/business/energy-environment/in-uncertain-times-a-need-for-stability.html?partner=rss&emc=rss