ENERGY: Dependence on Mideast Oil to Grow – Report

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Oct 26 2004 (IPS) - At a time when rich nations, especially the United States, are trying to break their dependence on Middle East oil, a global agency is predicting that fuel imports from the area will keep rising unless buying countries adopt "radical" technological changes.

At a time when rich nations, especially the United States, are trying to break their dependence on Middle East oil, a global agency is predicting that fuel imports from the area will keep rising unless buying countries adopt "radical" technological changes.

"More and more oil will come from fewer and fewer countries, primarily the Middle East members of OPEC (the Organisation of Petroleum Exporting Countries)," said the International Energy Agency (IEA) in its 2004 world energy outlook released Tuesday.

"The dependence of all importing countries on those suppliers will grow," it added.

"Major oil and gas importers – including most OECD countries, China and India – will become ever more dependent on imports from distant, often politically-unstable parts of the world," added the report, released in London.

The OECD, the Organisation for Economic Co-operation and Development (OECD) is made up mostly of North American and European nations.

But the 500-page analysis, which contains the IEA’s latest energy projections to 2030, said there is enough oil, and money to develop oil sites, in the world to maintain the current energy status quo for years.

"The Earth contains more than enough energy resources to meet demand for many decades to come," said IEA Executive Director Claude Mandil, in a statement.

"The world is not running out of oil just yet. Moreover, there is more than enough money globally to finance the large expansion of energy infrastructure that will be needed," he added.

According to the Outlook’s "Reference Scenario," without different government policies or increased use of new technology, world energy demand will rise 59 percent by 2030. More than 85 percent of that demand will be supplied by carbon-emitting fossil fuels like coal, oil and natural gas.

The report predicts that two-thirds of the new demand will come from the developing world, especially the two Asian giants: China and India.

Developing countries, where both production and demand are set to rise fastest, will need about one-half of global investment in energy. Meeting this demand, estimates the agency, will require total global investment of 16 trillion dollars, a whopping 568 billion dollars a year.

The report predicts that all developing regions, including Africa and Latin America, can expect to experience a jump in per capita energy use and better access to energy services, including electricity.

Demand for oil will continue to expand, at 1.6 percent a year, from 82 million barrels a day (mbd) now to 121 mbd in 2030. The IEA also forecasts that inter-regional trade in oil will double to 65 mbd.

Despite sounding confident about global fuel supplies, the agency warns that the energy situation is fraught with risk. It characterised soaring oil and gas prices, the increasing vulnerability of energy supply lines and increasing emissions of climate-destabilising carbon dioxide as, "symptoms of a considerable malaise in the world of energy."

On Tuesday, record crude oil prices slipped slightly, to 54.15 dollars a barrel on the New York Mercantile Exchange, still 80 percent higher than they were a year ago.

In the United States, where a horserace for president is down to the final week and oil price hikes have boosted gasoline and home fuel prices, both candidates have pledged to work to end U.S. dependence on Arab oil if elected Nov. 2. But the IEA report sounds a sober note on the challenges to realising those promises.

Many experts here have also called the candidates’ pledges no more than election pandering.

"Energy independence won’t do any good whatsoever unless we either stop using petroleum products altogether or, alternatively, ban all imports and exports of oil, gasoline and the like," said Jerry Taylor, director of natural resource studies at the Cato Institute in Washington.

Even if the United States were to withdraw from the oil market, the impact would be only more severe on consumers at home, he added.

The United States consumes 20.3 million barrels of oil a day but produces only 5.6 mbd. A country of 294 million people, it is already importing 2.5 million barrels of oil from Arab countries daily.

"How much would prices go up if we withdrew from the global oil market to secure our energy independence? à Well, knocking out imports would increase oil prices to well over 100 dollars a barrel and blow even today’s high gasoline prices through the roof," added Taylor in an interview.

Like the United States, the IEA found rich nations’ reliance on foreign oil supplies troubling and suggested an "alternative policy scenario," where world energy demand is 10 percent lower and carbon-dioxide emissions 16 percent less.

The world’s reliance on Arab oil and gas would also be much reduced, according to this scenario – similar to those floated by both U.S. presidential candidates – which calls for more efficient use of energy in vehicles, electric appliances, lighting and industry.

It would also shift the mix in energy sources in favour of renewable sources and nuclear energy.

Yet even under this scenario, the IEA acknowledges that energy imports and emissions would still be higher in 2030 than today. Thus, the agency singles out technology as the only possible way out of reliance on Arab oil.

"What this analysis shows very clearly is that achieving a truly sustainable energy system will depend on technological breakthroughs that radically alter how we produce and use energy," said Mandil.

The IEA called on governments to work towards developing new technologies "that allow us to meet our growing energy needs without compromising our energy security and the environment."