Friday, 17 September 2010

An Inconvenient Truth about OPEC

An interesting article over on Project Syndicate, here's a few paragraphs:

In forecasts that carry forward to the 2030’s, the three organizations [IEA, EIA and OPEC] share the view that world energy demand will increase, that developing countries will account for most of the increase, and that fossil fuel will remain dominant. They also agree that dependence on oil from OPEC members will increase as non-OPEC oil resources dwindle and become more expensive to extract. But a major flaw in modeling world oil markets makes these forecasts as unrealistic as a projection that humans will land on Mars tomorrow.
It is nearly impossible for OPEC members to produce the difference between estimated world demand and non-OPEC supply. For example, in its recent forecast, the EIA’s base-case scenario is that, by 2035, OPEC will add about 11 million barrels of oil a day (mb/d) to its 2010 output. Is this possible when production is declining at a rate of at least 3%?
Indeed, given the expected growth in energy demand in the next two decades, and the possible – even likely – shortfall in OPEC supply relative to the projected “call on OPEC,” the term “alternative energy” will lose its meaning. The only “alternative” to harnessing all feasible energy sources will be a slow-growth world of permanent shortages and increasing misery.

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