Westwood cites declining oil reserves and growing demand, especially in areas such as China, which are only likely to accelerate as their economies grow.
“The average American consumes 25 times as much oil as the average Chinese yet China has 5 times the population and is industrialising rapidly. Vehicle growth in China is rising rapidly and this will cause global demand for oil to continue its increase.”
Most alarmingly the report says that the current rate of global economic growth is increasing demand at such a rate that at 1% demand growth a oil production peak occurs in 2016, at 2% it occurs in 2012, and at 3% it occurs in 2008.
“The world’s known and estimated yet-to-find reserves and resources cannot satisfy even the present level of production of some 76 million barrels per day beyond 2020,” said Westwood.
Oil & gas supplies author, Dr Michael R. Smith of Energyfiles, said of the 99 countries that have produced or can produce significant oil, 52 are already well past their production peak, including the US, and this is now happening in several more, including the UK. Another 16 are at peak levels or will reach it soon.
“Large capital investments within OPEC countries are already required to rapidly increase production after 2008 by at least an additional 1 to 2 million barrels per day every year to offset declines elsewhere.”
The result of such a supply and demand dilemma could be a doubling of oil prices within the next three-to-four years, without any foreseeable relief until a new stable energy mix is ultimately achieved with substitute fuels.
“Price rises will depend on the real global response to impending and actual shortfalls – a response that needs to be implemented immediately. Drastic conservation will make prices fluctuate as they did in the oil shocks, always settling at a higher level,” said Smith.
“Without early remedial action the discussion is not if oil prices will massively increase, but when they will.”
Westwood has pointed to natural gas as a viable link fuel for a carbon-based energy market until suitable renewable based energy supplies are tapped.
“It is the only relatively clean alternative to oil and coal, fully supported by commercially effective production and distribution technologies – there is little doubt that natural gas will be the key fuel of the future.
“Total remaining gas reserves and resources are huge, estimated at 275 Tcm, almost double oil resources in oil equivalent terms. Russia holds the largest share but a significant portion is also located in the Middle East.
“Global production of natural gas, currently some 2,600 Bcm, is expected to grow to 4,755 Bcm per year by 2025 an average increase of 2.75% per annum. Estimates of capital required for its exploitation range between $25bn to $40bn per year. Considering LNG alone, we expect over $39 billion to be spent over the next five-year period on LNG plants, carriers and import terminals,” said Westwood.
