LONDON — The world is now drinking 84 million barrels of oil each day. The figure may be meaningless to most people but to energy planners, security strategists and environmentalists it spells growing disappointment and danger. Why so? Because only a short while ago the figure was 72 million barrels, and a year or so back it was 68 million.
In short, the global appetite for oil is growing at an alarming rate. This surge in oil consumption was not widely forecast. On the contrary, policy planners everywhere have been hoping for, and even predicting, at least a halt in the growth of oil consumption over the next few years.
For obvious reasons the planners desperately want to reduce the dependence of the global economy on the Middle East, where two thirds of known oil reserves are located.
Meanwhile, the would-be climate-changers want to see oil growth checked because, along with coal, it makes the largest contribution to carbon-dioxide emissions that are heating up the globe and may even now be triggering unsettled and destructive new weather patterns, such as the unending series of hurricanes in both the Atlantic and the Pacific this summer.
Finally, there are the energy idealists who want to see a low-energy future with green alternatives taking over from finite oil resources.
So all round there are pious and commendable wishes that oil consumption worldwide ought to fall, and all round these hopes are being negated.
There are two main reasons. On the demand side few people foresaw how rapidly the thirst of China for imported oil would grow. A year ago forecasters were talking about China importing two million barrels of oil a day. Now it is importing four million and looks set for amounts up to eight million by 2010. China now gulps down more oil every day than Japan.
India, the other power in the billion-people league, is also turning in a brilliant economic performance, meaning that its local coal and oil supplies cannot possibly keep up with the nation’s needs. But the biggest offender of all when it comes to oil thirst is the United States, which now imports no less than 68 percent of its daily oil “fix” and burns a quarter of the planet’s energy output.
For a brief period after the 1970s oil shocks the Americans took energy conservation and efficiency seriously. But since then decades of relatively cheap oil have allowed all concerns to be thrown to the winds, as demonstrated by the popularity of Detroit’s gas-guzzling monsters.
All this would be just manageable if world supply was keeping pace with demand. But that is not happening. Of course, there is still plenty of oil under the ground. But to get it out and into refineries involves titanic investment. And that in turn requires conditions of reasonable stability.
Where, nowadays, is this stability to be found? In Iraq, where pipelines are blown up every day? In Iran, with its unpredictable ayatollahs? In Saudi Arabia, which is fraught with political tensions and terrorist attacks? Is Nigeria a place where prudent investors want to put their cash? Or politically unstable Venezuela or Algeria? Or is Russia, with all its vast reserves — albeit much more expensive to extract that than Middle East supplies — the safe place to put long-term investment and to look for steady and safe returns over the decades ahead? News of arrested oil oligarchs, blown-up aircraft and endless war and terrorism in the Caucasus hardly gives encouragement.
Soaring world demand and lagging investment in new oil production can only spell one thing — higher oil prices. And that is indeed what is occurring, dragging up with it the price of natural gas and of coal, as consumers rush for alternative fuels.
In the ’80s and ’90s oil was cheap and there was plenty of it — some would say too much. Refineries were closed, oil companies merged and profits were scarce.
But suddenly the situation appears to have been reversed. Oil markets are tight and look set to stay that way. The OPEC nations, which 10 years ago seemed to have lost all power as the world oil price sagged, have now regained their grip. More oil may be coming from the Caspian Sea basin and other non-OPEC sources, but it is not nearly so cheap to produce. Meanwhile, North Sea oil production has peaked and is falling, exposing Britain — once again a net importer of both natural gas and oil — to the vagaries and dangers of the international energy system.
For the world to break away from this downward spiral of higher oil prices, more risks and more threats to the global climate requires a wholly new set of combined strategies, both to use less oil, divert investment from the old energy economy to new technologies and cut reliance on a complex network that is getting more vulnerable than ever.
Of these strategies there are at present few signs. Those who have sunk billions into the old system — the old power stations, the old oil fields, the old pipelines and grids, the thirsty motor vehicles and aircraft — are not going to move until it is clearly profitable to switch. And that is not going to happen unless governments and consumers become alarmed enough to make that so.
So far, while the alarm bells are ringing loudly, few are listening. The moment of realization will dawn. Let us hope it is not too panic-laden and disruptive when it comes.
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