Sunday, October 25, 2009

the sun slowly sets on the west's oil men

Telegraph | “Oh somewhere in the $60 to $90 range for the foreseeable” – that was the consensus for the oil price that most energy executives milling around at the Oil & Money conference in London gave this week.

That is until John B Hess, the man whose father founded the $120bn oil-exploring Hess Corporation 76 years ago, shook up the room with his apocalyptic outlook for the world’s galloping energy consumption.

The price of $140 per barrel oil was not an aberration. It was a warning,” he started. Some home truths from Mr Hess followed:

1 ) About 85pc of the world’s energy comes from hydrocarbons. Renewable energy does not have the scale, timeframe or economics to materially change this outcome.

2) Oil demand growth will be unrelenting, increasing 1m barrels per day each year. But non-OPEC production is in the process of, if not peaking, reaching a plateau. And 73 pc of the countries that produce oil have already peaked.

3) The role of the national oil companies [most OPEC nations] is critical. They need to invest more or allow others to partner with them. We do not have the luxury of time.

4) We will ultimately be at risk of supply rationing demand through skyrocketing prices that will threaten economic stability and prosperity. If we do not act now, we will have a devastating oil crisis in the next 5-to-10 years.

5) Emissions targets to limit global warming to no more than two degrees are unrealistic. To meet this target, global annual CO2 emissions would have to be reduced from today by more than 80pc by 2050. With world population growth and rising living standards, holding global CO2 emissions flat by 2050 would be a huge achievement
in itself.

So how far do we believe his doom and gloom? He is, after all, a man who sells oil for a living, with an interest in talking up the world’s dependence on fossil fuels. It depends how much faith you have in reduced demand for oil through energy efficiency and electric transport, but on balance, the dire warnings do not seem outlandish.