The timing of peak demand for oil will be hugely affected by global political developments over the coming decades, and in particular by the extent to which elite forces maintain their control, according to analysts who work for Shell.
The massive gas and oil concern (it is now more a gas than an oil corporation) has a future scenarios assessment team in its headquarters in the Hague, where the core group works with experts from diverse sectors to produce ideas about the forces that will drive global change in the coming decades.
The idea, according to Rhodri Owen-Jones, a member of the scenarios team who was in Dublin recently, is to get decision-makers within the group to get “comfortable with ambiguity” and also to challenge assumptions and identify blind spots.
The purpose is not to provide answers, he says, though the fingerprints of the scenarios process can be seen on some of the major strategic decisions the group has made in recent times, including its shift towards gas.
Owen-Jones’s enthusiasm for the big-picture speculations he works with is obvious. The 100 years to 2050, he says, will be seen by future historians to be the “century of the city”. At present 3.6 billion people live in cities but by 2050 that figure will have increased to 6.3 billion, or 75 per cent of the world’s total. The equivalent of a 1.4 million population city will be built every week for the next 36 years.
Energy-efficient cities
What this means is that an enormous potential exists to build energy-
efficient cities, or to allow for hugely inefficient urban sprawls. Also, energy and urban design will have a huge impact upon such resource questions as land, food and water.
The scenarios team envisages two broad plausible types of development in today’s globalised, connected and volatile world (where the US is losing dominance and China is on the rise). It calls one “mountain” and the other “ocean”.
In the former, elite forces managed to maintain their position and rule comes from the top down. This delays necessary reforms, slowing economic growth and, therefore, demand for energy.
Furthermore, with individuals and society generally less empowered, the elites would be more able to plan efficient, high-density cities. Energy prices would be moderate and natural gas would provide the backbone of the system. Peak oil demand would occur about 2030.
In the ocean scenario the normal calm would be accompanied by occasional volatility. People would be empowered and core reforms would promote growth and creativity. However, government and big business would lost authority, especially among users of social media, and there could be quick outbreaks of often badly considered strong opinion.
Urban planning
Nuclear power and non-conventional gas (outside the US) would face strong popular resistance, and efficient urban planning would be more difficult to achieve. This
and stronger economic growth would mean greater demand for energy, driving prices higher. This would make renewables more price-competitive. By 2060 solar will be the biggest source of primary energy. Peak oil demand will occur in 2040.
Under both scenarios, global governments fail to introduce the necessary restrictions to keep global warming below 2 degrees. Shell, says Owen- Jones, believes tight regulation will reduce CO2 emissions eventually, but with global population growth fuelling a 70 per cent rise in energy demands by 2050 there will continue to be a huge demand for oil and gas.
Of course the likely outcome for the future is a mix of mountains and oceans, and the key lesson is to get increased collaboration so as to deal with the massive challenges that face the globe, he says.
The prominent role played by gas in both mountain and ocean scenarios is one reason for Shell’s long term investments in gas, Owen-Jones says.
The energy sector is in the business of long-term investment, and thinking about the plausible – as against the possible – future is a contributor to successful decision-making, he says.
