Here’s an alarming chart to ponder (click to enlarge). HSBC has calculated what would happen to energy consumption by 2050 given plausible forecasts for economic growth and assuming no constraint on resources, or that humans carry on using energy in the “taken for granted” way they do at the moment.
As you can see, demand in China, India and other emerging markets soars, but there is also quite considerable growth from advanced economies too. The big picture is that with an additional one billion cars on the road, demand for oil would grow 110pc to more than 190 million barrels per day. Total demand for energy would rise by a similar order of magnitude, doubling the amount of carbon in the atmosphere to more than three and a half times the amount climate change scientists think would keep temperatures at safe levels.
It scarcely needs saying that regardless of the environmental consequences, energy industries would struggle to cope, and more likely would find it impossible. We may or may not already be perilously close to peak oil – or maximum productive capacity – but nobody believes the industry could produce double what it does at the moment, however clever it becomes in tapping previously uncommercial or inaccessible reserves.
If something can’t happen, then it won’t, so is all that forecast growth in the developing world just a question of wishful thinking that will soon be dashed by the constraints of finite energy? Not necessarily, says HSBC’s economics team. The world can still accommodate high growth, but only if there is a collective change in behaviour, including much greater energy efficiency, a big change in the energy mix, and urgent development of carbon capture technologies so as to limit the damage of fossil fuel usage.
As I’ve written on several occassions before, the big prize here is the US, where per capita use of oil is far higher than anywhere else in the world. If this consumption were reduced to European levels, as is perfectly possible without damage to living standards, it would remove a demand source equal to Saudi Arabia’s entire current output of oil.
So it should indeed be possible to accommodate the rise of China and other emerging markets without exhausting resources or destroying the planet. But it’s going to require massive collective will, of a type the US and others have been unwilling to contemplate up until now.
The most common cause of energy price shocks is supply disruption. It’s the fear of just such a disruption, with turmoil in the Middle East, which is driving the oil price right now. But in future it’s much more likely to be the pressure of demand on limited supply. Nevermind developments in North Africa and elsewhere in the region. That’s a mere bagatelle compared with what may be coming. These demand tensions could create much wider geo-political instability, with potentially catastrophic inter-continental consequences.
A rising energy price will of itself naturally lead to greater efficiency and slower growth, but it may well require something altogether more traumatic to bring nations to their senses and galvanise the necessary collective change in behaviour. We are fast approaching an era when energy will have to be rationed. This can either be done in a peaceful manner, or we can carry on as we are, in which case it is all too likely to end up being settled down the barrel of a gun.
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