Signals and Signposts: The world is heading for an oil drought, says Shell  

The Australian has an article on Shell's latest set of scenarios for world energy consumption, called "Signals and Signposts" (see here for their previous version, "Blueprints or the Scramble"), which predicts a plateau in oil production by the end of the decade (its still mostly optimistic for fossil fuels and overly pessimistic about renewables) - The world is heading for an oil drought, says Shell. In the latest report, Shell predicts Iraq will double oil output over the next 10 year.

THE global appetite for energy is likely to swell far more rapidly than available supply in coming decades as oil production hits a plateau and emerging markets see rampant economic growth, Royal Dutch Shell has said.

The oil giant predicts that by 2050 world energy demand may have tripled compared with 2000 levels, based on historical patterns of development.

However, energy supplies may grow by only 50 per cent in the same period.

Improvements in energy efficiency could curb demand by 20 per cent.

But the world still needs to figure out how to bridge a looming gap between supply and demand equivalent to the global energy industry's entire output in 2000, Shell calculated. By the end of this decade the world will run into a plateau in oil production, a development that will put "upward pressure" on oil prices. Jeremy Bentham, the vice-president for Business Environment at Shell, said: "The coming surge in energy demand reflects the surge in developing nations. China will be continuing through its industrialisation period over the next 10 years, and India is probably 10 years behind that.

"This will be followed by the likes of Indonesia, Vietnam, and so on. These successive waves of development will create a surge in underlying demand for energy. This is leading us to a vast zone of uncertainty."

The projections came in a report updating energy scenarios that Shell published in 2008.

Since then the recession set global energy demand back by about two to three years, meaning that 2008 demand levels will be reached again only this year.

However the broader trend in energy markets is clear, a Shell report said. The world faces rapid demand growth as emerging markets industrialise, coupled with increasing strains on traditional sources of energy.

Oil production is likely to rise 16 per cent between last year and 2020, Shell's projections show.

Growth over the subsequent 10 years will be virtually non-existent, however, leaving oil production at about 96 million barrels of oil a day, Shell said.

Mr Bentham said that while oil production is set to plateau at the end of the current decade, "the stresses in the oil markets may come much earlier".

He said: "You saw the foreshocks of those developments in 2007-08, interrupted by the recession. Now you are seeing in the market a building up of tension again. In the short term you are in a manageable situation given Opec's spare capacity but you get to a more stressed situation later in the decade."

Brent crude prices currently hover above $US100 a barrel amid tensions in the Middle East and growth of about 10 per cent a year in China.