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Changing the Oil Economy
State of the World
Worldwatch Institute
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The Oil Economy
Strategic commodity Economic security
Civil security
Climate security Alternatives
Courtesy Elmendorf AFB
The Oil Age fueled the 20th
CenturyHow does it affect global security?
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Oil in Modern Life
Cars and power plants
Personal care products,cosmetics and drugs
CDs, cell phones, radios,
cameras, TVs
Clothing, sports, householdfurnishings
Food production and
transport
How wide spread is our oil-basedculture?
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A Strategic Commodity
Oil is central to modern civilization It is the worlds largest source of energy
Oil has changed from an asset to a liability Oil is key to manufacturing, feedstock and energy
and there are no ready substitutes
Oil dominates world energy budgets Per capita and total energy consumption
skyrocketed once fossil fuels became widely
available
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From Wood to Oil
0
5
10
15
20
25
30
35
40
1630 1680 1730 1780 1830 1880 1930 1980 2030
U.S. Consumption, 1630-2000Quadrillion Btu
Source: DOE
Petroleum
Natural Gas
Nuclear Electric Power
Hydroelectric Power
Coal
Wood
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Consumption
World Oil Consumption, 1950-2004
Source: BP
0
10
20
30
40
50
60
70
80
90
1950 1960 1970 1980 1990 2000 2010
M
illionBarrels
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China
China exported oil in the early 90s Today, it is the worlds second largest importer
0
1
2
3
4
5
6
7
1970 1980 1990 2000
Millio
nBarrels/Day
Production
Consumption
Source: DOE
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Consumption
Global consumption of useful energyper person is about 13 times higher
than in pre-industrial times
Per capita consumption is muchhigher in industrial than developing
nations
Consumption has risen despite
increasing pollution, emissions
and other problems USDA
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Transportation
The worlds automobile fleet
grew from 53 million in 1950
to 539 million in 2003
China, with an expanding
economy, now has 20 millioncars and trucks and by 2020
is projected to have a fleet of
120 million
Automobiles
Digital Vision
Oil accounts for nearly all transportation energy use
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Transportation
Air travel has increased
dramatically since jets were
introduced
1950: 28 billion
passenger-km
2002: 2,942 billion
passenger-km
Air Travel
NASA
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Supply
Conventional view--production will keep rising
IEA projects production will reach 121 million barrels
per day
Sufficient oil reserves exist and new technologies willaid in better extraction
DOE
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A Finite Resource
Dissident view--production will begin to decline by2007
Gap between supply and demand will continue to grow
New technologies will only accelerate rate of depletion
Production has outrun discovery for past three
decades
Getty Images
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Discoveries
World oil discoveries are lagging far behind production
0
10
20
30
40
50
60
1920 1940 1960 1980 2000 2020
Discoveries
Production
BillionBarrels
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Production & Resources
BillionBarrels
Source: DOD, DOE
0
5
10
15
20
25
30
1500 1700 1900 2100 2300 2500
Historical Production
Estimated Resources
According to many geologists, resource constraintsmay soon limit world oil production
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Falling Production
6 of OPECs 11 members
United Kingdom
Indonesia
Norway
Mexico
Venezuela
Getty Images
Production has reached a plateau or declined in 33of the 48 largest producers, including:
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0
2
4
6
8
10
12
14
1950 1960 1970 1980 1990 2000 2010
MillionBarrels
Oil Production
United States
Former Soviet Union
Saudi Arabia
Production Per Day
Source: BP
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0
2
4
6
8
10
1955 1965 1975 1985 1995 2005
U.S. Production
Million Barrels Per Day
Source: DOE
Lower 48 states
Alaska
U.S. oil production peaked in 1971
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Dependency
Industrial nations use most of the worlds oil
Developing nations
Are more dependent on oil as share of total energy use Use more in proportion to the size of their economies
Many import virtually all their oil
Are more vulnerable to price shocks than many
industrial nations
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0 10 20 30 40 50 60 70 80
Dependency
Percent of Oil in Energy Budgets
Ecuador
Thailand
Japan
U.S.
France
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Paying the Price
DollarsPerB
arrel
Two decades of stable oil prices have abruptly ended.Is this a temporary anomaly?
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Human Cost
Price increases translate into human cost in poorcountries
rising food costs affect diets
cooking fuel becomes less affordable
FAO UN
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Price and Economic Growth
IEA estimates that if the price per barrel price increaseis sustained, it will reduce economic growth throughout
the world in 2006
0 1 2 3 4 5 6
Percent Reduction inEconomic GrowthU.S.
Europe
India
Indebted
countries
1.0
1.6
3.2
5.1
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World Oil Trade, 2002
Exports, MBD
< 11-22-45-6
6-9
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World Oil Trade, 2020
Exports, MBD
< 11-22-45-6
6-98.8
1970 1980 1990 2000 2010 2020
Trillion
Ton-Miles5.6 8.3 6.3 7.1 8.8 12.9
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Uncertainty
Growing demand will increase dependence on
supplies from the Middle East
Oil-producing countries are often politically unstable
True state of reserves in Persian Gulf, particularly
Saudi Arabia, are in question
Countries such as China and India are entering into
oil-intensive development and will intensify competitionfor oil
Competition will trigger soaring prices
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Oil and Civil Society
Access to oil has provoked
power maneuvering, military
interventionism, and alliances of
convenience
Oil resource wealth has tended
to support corruption and conflict
rather than growth anddevelopment
Lance Cpl. Nathan Alan Heusdens
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Oil and Climate
Global consensus thatEarth is warming and
that deforestation and
the burning of fossil
fuels are the majorcauses of climate
change
Oil contributes 42% of all emissions of carbon
dioxide (CO2) emissions, a greenhouse gas
Digital Vision
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Temperature Changes
The global average temperature is already higher than atany time since the Middle Ages
13.0
13.4
13.8
14.2
14.6
15.0
1860 1880 1900 1920 1940 1960 1980 2000
DegreesCelsius
Source: Goddard Institute for Space Studies (GISS)
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0
100
200
300
400
1980-84 1985-89 1990-94 1995-99 2000-04
Weather Disasters
The economic cost of weather-related catastrophes
Source: Munich Re
Billion Dollars
Uninsured Losses
Insured Losses
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The Tipping Point
We may already be in the early
stages of a global energytransition
One that is as profound as the
advent of the oil age was acentury ago.
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Improving Efficiency
Improving automobile fuel economy can
make an enormous difference
Gasoline and diesel-electric hybrid cars are
twice as efficient as internal combustion
engines
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Renewable Energy
Wind- and solar-generated electricity are
the fastest growing
sources of energy in the
world
Biomass fuels such asethanol and biodiesel are
proven and competitive with
gasoline and diesel
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Wind
Wind energy is becoming a major part of the global powerindustry
Megawatts
Source: BTM Consult, EWEA, AWEA, Windpower Monthly and New Energy
0
10,000
20,000
30,000
40,000
50,000
60,000
1980 1985 1990 1995 2000 2005
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Biofuels
Biofuels are joining the bandwagon
MillionLite
rs
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1980 1985 1990 1995 2000 2005
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Policy Changes
1) Ensure that energy markets include renewable
options
Enact pricing laws to guarantee fixed minimum
prices for electricity
Require that utilities provide access to grids
Establish quota systems mandating a share for
renewables
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Policy Changes
1) Focus on industry standards, permits and
building codes
Ensure quality hardware Address public concerns
about siting
Design new buildings to
be compatible withrenewables
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Policy Changes
1) Educate investors
and consumers
Ensure a skilled
workforce
Increase public
participation
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Choices
World Energy Use
Source: Martinot, BP
0
5
10
15
20
25
30
35
Oil
Ot
her
Rene
wabl
es
Nucle
ar
Hydr
o
Trad
ition
al
Bio
mass
Natu
ral
Ga
sCoal
% 2004
h
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Choices
0
5
10
15
20
25
30
35
Hydr
o Oil
Nucle
ar
Win
d
Biof
uels
Gas
Trad
ition
al
Biom
ass
Coal
Solar
PV
Source: Martinot, BP
World Energy Growth (2002-2004)
Annual PercentGrowth Rate
h d h ?
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What do you choose?
One path leads to the
possible calamitous loss of
a prime energy source
The other path leads toward a
world of abundant clean
energy for more of the worlds
people
W ld h I i
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Worldwatch Institute
Further information andreferences for the material in this
presentation are available in the
Worldwatch Institutes publication
State of the World 2005
www.worldwatch.org
This presentation is based on a
chapter authored by:
Thomas Prugh, ChristopherFlavin, and Janet L. Sawin