Page 1 of 2

World Energy Report 2012: The Good, the Bad, and the Really, Truly Ugly

Actually, the "good news" that the US could become the world's number one energy producer is bad news—for the planet.

| Tue Nov. 27, 2012 12:06 PM PST

This story first appeared on the TomDispatch website.

Rarely does the release of a data-driven report on energy trends trigger front-page headlines around the world. That, however, is exactly what happened on November 12th when the prestigious Paris-based International Energy Agency (IEA) released this year's edition of its World Energy Outlook. In the process, just about everyone missed its real news, which should have set off alarm bells across the planet.

Claiming that advances in drilling technology were producing an upsurge in North American energy output, World Energy Outlook predicted that the United States would overtake Saudi Arabia and Russia to become the planet's leading oil producer by 2020. "North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world," declared IEA Executive Director Maria van der Hoeven in a widely quoted statement.

Advertise on MotherJones.com

In the US, the prediction of imminent supremacy in the oil-output sweepstakes was generally greeted with unabashed jubilation. "This is a remarkable change," said John Larson of IHS, a corporate research firm. "It's truly transformative. It's fundamentally changing the energy outlook for this country." Not only will this result in a diminished reliance on imported oil, he indicated, but also generate vast numbers of new jobs. "This is about jobs. You know, it's about blue-collar jobs. These are good jobs."

The editors of the Wall Street Journal were no less ecstatic. In an editorial with the eye-catching headline " Saudi America," they lauded US energy companies for bringing about a technological revolution, largely based on the utilization of hydraulic fracturing ("fracking") to extract oil and gas from shale rock. That, they claimed, was what made a new mega-energy boom possible. "This is a real energy revolution," the Journal noted, "even if it's far from the renewable energy dreamland of so many government subsidies and mandates."

Other commentaries were similarly focused on the US outpacing Saudi Arabia and Russia, even if some questioned whether the benefits would be as great as advertised or obtainable at an acceptable cost to the environment.

While agreeing that the expected spurt in US production is mostly "good news," Michael A. Levi of the Council on Foreign Relations warned that gas prices will not drop significantly because oil is a global commodity and those prices are largely set by international market forces. "[T]he US may be slightly more protected, but it doesn't give you the energy independence some people claim," he told the New York Times.

Some observers focused on whether increased output and job creation could possibly outweigh the harm that the exploitation of extreme energy resources like fracked oil or Canadian tar sands was sure to do to the environment. Daniel J. Weiss of the Center for American Progress, for example, warned of a growing threat to America's water supply from poorly regulated fracking operations. "In addition, oil companies want to open up areas off the northern coast of Alaska in the Arctic Ocean, where they are not prepared to address a major oil blowout or spill like we had in the Gulf of Mexico."

Such a focus certainly offered a timely reminder of how important oil remains to the American economy (and political culture), but it stole attention away from other aspects of the World Energy Report that were, in some cases, downright scary. Its portrait of our global energy future should have dampened enthusiasm everywhere, focusing as it did on an uncertain future energy supply, excessive reliance on fossil fuels, inadequate investment in renewables, and an increasingly hot, erratic, and dangerous climate. Here are some of the most worrisome takeaways from the report.

Shrinking World Oil Supply

Given the hullabaloo about rising energy production in the US, you would think that the IEA report was loaded with good news about the world's future oil supply. No such luck. In fact, on a close reading anyone who has the slightest familiarity with world oil dynamics should shudder, as its overall emphasis is on decline and uncertainty.

Take US oil production surpassing Saudi Arabia's and Russia's. Sounds great, doesn't it? Here's the catch: previous editions of the IEA report and the International Energy Outlook, its equivalent from the US Department of Energy (DoE), rested their claims about a growing future global oil supply on the assumption that those two countries would far surpass US output. Yet the US will pull ahead of them in the 2020s only because, the IEA now asserts, their output is going to fall, not rise as previously assumed.

This is one hidden surprise in the report that's gone unnoticed. According to the DoE's 2011 projections, Saudi production was expected to rise to 13.9 million barrels per day in 2025, and Russian output to 12.2 million barrels, jointly providing much of the world's added petroleum supply; the United States, in this calculation, would reach the 11.7 million barrel mark.

The IEA's latest revision of those figures suggests that US production will indeed rise, as expected, to about 11 million barrels per day in 2025, but that Saudi output will unexpectedly fall to about 10.6 million barrels and Russian to 9.7 million barrels. The US, that is, will essentially become number one by default. At best, then, the global oil supply is not going to grow appreciably—despite the IEA's projection of a significant upswing in international demand.

But wait, suggests the IEA, there's still one wild card hope out there: Iraq. Yes, Iraq. In the belief that the Iraqis will somehow overcome their sectarian differences, attain a high level of internal stability, establish a legal framework for oil production, and secure the necessary investment and technical support, the IEA predicts that its output will jump from 3.4 million barrels per day this year to 8 million barrels in 2035, adding an extra 4.6 million barrels to the global supply. In fact, claims the IEA, this gain would represent half the total increase in world oil production over the next 25 years. Certainly, stranger things have happened, but for the obvious reasons, it remains an implausible scenario.

Add all this together—declining output from Russia and Saudi Arabia, continuing strife in Iraq, uncertain results elsewhere—and you get insufficient oil in the 2020s and 2030s to meet anticipated world demand. From a global warming perspective that may be good news, but economically, without a massive increase in investment in alternate energy sources, the outlook is grim. You don't know what bad times are until you don't have enough energy to run the machinery of civilization. As suggested by the IEA, "Much is riding on Iraq's success... Without this supply growth from Iraq, oil markets would be set for difficult times."

Continuing Reliance on Fossil Fuels

For all the talk of the need to increase reliance on renewable sources of energy, fossil fuels—coal, oil, and natural gas—will continue to provide most of the additional energy supplies needed to satisfy soaring world demand. "Taking all new developments and policies into account," the IEA reported, "the world is still failing to put the global energy system onto a more sustainable path." In fact, recent developments seem to favor greater fossil-fuel reliance.

In the United States, for instance, the increased extraction of oil and gas from shale formations has largely silenced calls for government investment in renewable technology. In its editorial on the IEA report, for example, the Wall Street Journal ridiculed such investment. It had, the Journal's writers suggested, now become unnecessary due to the Saudi Arabian-style oil and gas boom to come. "Historians will one day marvel that so much political and financial capital was invested in a [failed] green-energy revolution at the very moment a fossil fuel revolution was aborning," they declared.

One aspect of this energy "revolution" deserves special attention. The growing availability of cheap natural gas, thanks to hydro-fracking, has already reduced the use of coal as a fuel for electrical power plants in the United States. This would seem to be an obvious environmental plus, since gas produces less climate-altering carbon dioxide than does coal. Unfortunately, coal output and its use haven't diminished: American producers have simply increased their coal exports to Asia and Europe. In fact, US coal exports are expected to reach as high as 133 million tons in 2012, overtaking an export record set in 1981.

Despite its deleterious effects on the environment, coal remains popular in countries seeking to increase their electricity output and promote economic development. Shockingly, according to the IEA, it supplied nearly half of the increase in global energy consumption over the last decade, growing faster than renewables. And the agency predicts that coal will continue its rise in the decades ahead. The world's top coal consumer, China, will burn ever more of it until 2020, when demand is finally expected to level off. India's usage will rise without cessation, with that country overtaking the US as the number two consumer around 2025.

In many regions, notes the IEA report, the continued dominance of fossil fuels is sustained by government policies. In the developing world, countries commonly subsidize energy consumption, selling transportation, cooking, and heating fuels at below-market rates. In this way, they hope to buffer their populations from rising commodity costs, and so protect their regimes from popular unrest. Cutting back on such subsidies can prove dangerous, as in Jordan where a recent government decision to raise fuel prices led to widespread riots and calls for the monarchy's abolition. In 2011, such subsidies amounted to $523 billion globally, says the IEA, up almost 30% from 2010 and six times greater than subsidies for renewable energy.

Page 1 of 2
Get Mother Jones by Email - Free. Like what you're reading? Get the best of MoJo three times a week.