Issue Analysis: Living without oil
presented by Anne-Sophie Mercier and Matthias Beermann and released on September 11 2004.
Europeans were they prepared to limit their vulnerability? Answers from Jacques Attali.
I - GENERAL IDEA:
Our economies and our lifestyles strategically dependent on the abundance of cheap oil. But this abundance is limited in time, procurement costs will inevitably increase. Europeans have experienced first with the oil shock of 1973, discovering the painful vulnerability of our societies to the price of a barrel of crude. But from this shock, and despite regular attacks on the oil market, oil revenues are at a low price, and Europe has forgotten to prepare for the end of oil.
The need to fight against global warming by limiting emissions of greenhouse gases is a new motivation to seek alternatives to any oil. Yet 30 years after the first oil shock, little has been done: Europe still depends vitally abundance of cheap oil.
II - ELEMENTS OF INFORMATION
1- THE CONTEXT OF THESE MONTHS:
SUSTAINABLE TREND RISING PRICE OF OIL BARREL.
Crude prices have surpassed the dollars 40 for several months, and approaching $ 50 ($ 47 24 the August in New York). The average price since the first oil shock of $ 20 barrel. With a barrel at $ 40, in constant currency, it remains below the price shocks 1973 or 1979 (80 $ a barrel during the Iranian crisis).
On 4 months, petrol and diesel increased 10 € cents at the pump, or about + 10%
NB: It is interesting to note that the actual average cost price of a barrel of oil is less than $ 10.
The reasons for this price increase:
-exponential increase in global demandWhich does not diminish in Europe, increases in the US, and explodes in China, with the multiplication of the fleet and the strong Chinese growth.
-Instability of supply : Iraq crisis (although exports picked up in the south) and tensions in the Middle East, uncertainty in Venezuela (resolved since the end of August after the success of Chavez in the referendum), uncertainty in Russia, with tax, legal problems (and political) of the Russian number one Yukos threatened dismantling and bankruptcy while product 2% of world supply.
-Inadequate infrastructure. With the exception of Saudi Arabia, the member countries of OPEC have not optimized their production capacity. On the other hand, there is pressure on refining infrastructure: the number of refineries is insufficient to convert all oil extracted, especially in the USA, where the price increase.
Everything is however not clear: some are surprised by the current shortage of the offer then all producers produce at full capacity (including OPEC). Some blame the USA and majors to hide and store a portion of their reserves.
Others emphasize the price speculation: it seems that speculators after the explosion of highly profitable internet-technology bubble, will be folded on oil, one of the last areas where we can earn lots of money. The barrel price developments is therefore very dependent on speculation, very sensitive to international economic and political context, which exacerbate the existing tensions in the oil supply.
1 - this increase is felt less severely in Europe, due to the strength of the euro against the $.
2 - this context of rising prices also made happy.
It is very profitable for big oil companies: results of the majors are very strong rise in recent months (especially as refining margins are also increasing): + 30% for Total, + 38,8% for Exxon Mobil + 16% for Shell.
Producing countries also benefit: Saudi Arabia has projected a budget surplus of $ 35 billion for the year 2004. (But demand a lower price for a barrel, about $ 30).
According to INSEE, a barrel cost $ 50 0,24 growth point because investment and consumption would be penalized.
Logically, those who suffer from these prices are the companies of transport, air, road and sea. Air France has risen in price to 2 12 euros depending on the destination.
A 2- WHEN THE END OF OIL?
We currently produce 75 million barrels daily. Every year we brûulons that took nature a million years to form.
Nobody is willing to assess the reality of global oil reserves.
But the debate, although limited to oil professionals and experts, is virulent: when we spend the PEAK OIL, the beginning of the decline of reserves? Some say today. Optimists argue 2050. The debate between scientists schematically (pessimistic) economists (optimistic).
The most common estimates are based on the Hubbert method. King Hubbert is an American geologist who in 1956, 1970 had precisely predicted for the fall in production in the USA by observing the evolution of the production as a bell curve.
Generally, evaluation of a field is a calculation of probability. No certainty.
Nature (November 2003): according to a study commissioned by British major BP, constant consumption remains 40 years of oil, gas 60 years, 230 years of coal. Or two generations.
There are "cousins" of oil that are already mobilized as unconventional oil - tar sands of Canada or extra heavy crude from Venezuela. They represent about 25 years consumption. But their operation is more expensive and certainly more polluting than oil.
Conventional oil reserves are estimated undiscovered average 3 000 billion barrels (source US Geological survey's world petroleum assessment - 2000) or 40 years of additional consumption.
Technological advances allow better recovery of existing resources. Today, on average, only a third of the resources in place is recovered. Increasing 1 point average recovery rate represents 2 years of additional consumption.
Moreover, thanks to the increase in oil prices, some deposits hitherto unexploited because too expensive again become profitable.
One of the most active players in the debate on the reality of oil reserves is ASPO, the Association for the study of the peak oil. It brings together former senior exploration of large oil companies and geologists, and asserts that the falsification of official reserves data is systematic. According to ASPO, for example, OPEC reserves are overestimated 46% (because OPEC index their production quotas on their reserves reported more they say, the more they can produce).
ASPO believes that rste 1000 billion barrel reserves.
The Shell case has recently proved: the company has been heavily punished on stock markets for overstating its own reserves.
Note: there will still be oil, but the cost of its extraction will be too great: thus short not to dry down, but the price explosion.
The exponential increase in demand
A barrel of oil = 159 liters. We consume 29 billion barrels per year.
Oil still accounts 42% of the total energy production, 23% for natural gas, 65% hydrocarbons (8% nuclear).
Transport still depends 96% oil (by OECD).
And oil is not only a source of energy: it is also essential for food, chemicals, medicines, clothing, and all plastic products around us.
direct consequence of population growth and the gradual rise in living standards, world primary energy demand should continue to grow by the 2030 horizon; 15 could reach giga tonnes oil equivalent (Gtoe) in 2030 (for 9 Gtoe today), a growth rate of 1,7% per year (baseline scenario of the International Energy Agency). Over the whole period, this increased demand will be mainly the fact of countries developing that will experience an increase in their needs 140% against only 34% for OECD countries.
Today 50% of oil transportation for final use (against only 36% in 1973) and petroleum products are 96% of the energy used in road transport. Alternative energies exist (CNG, LPG and oxygenated fuels or agricultural chemical, etc.) and are used for some long ago, but they represent less than 2% of the total energy transport: there will not substitute oil that is economically competitive and massively on the horizon 20 30 in coming years.
Little hope with the current alternative energy.
To meet the increased demand, the mobilization of all the energy sources will be needed to complete the oil than to compete with or replace. But the share of renewables in the global energy balance (water included) should remain relatively stable (around 5% according to the IEA), despite strong growth in some sectors such as photovoltaics or solar wind.
The implementation of strong policy incentives could probably increase the share of renewables, but difficult to do on the horizon 2020-2030, a solid substitute for fossil fuels, particularly for cost reasons.
Conclusion: the contribution of oil to meet global energy needs will remain high (65% against approximately 62% today), the share of natural gas becoming more consistent.
3 - DEPENDENCE OF EUROPE
The enlarged EU will consume in 2004 20% of global oil production.
The European economy is based on fossil fuels: oil and gas are 4 / 5 of our total energy consumption. We import the 2 / 3. And this proportion is expected to increase: with the gradual depletion of North Sea resources, Britain has again become a net oil importer in August 2004.
In 2030, in the EU Green Paper on energy, oil could be imported up to 90% of our consumption. Lack of own resources, the EU has no alternative: it must act on energy demand (by redirecting or mastering, unlike the USA that home in their energy level, decided to rely on a always increased supply, which proves their international policy through East and West Africa).
The priority for energy saving: transport, accounting 32% of energy consumption and emissions of 28% CO2.
But for now, the only purpose of government is to limit the upward trend in demand. Tax weapon could be effective, but it is already used.
4 - BIOFUELS
Biofuels have a double benefit: they reduce oil consumption and reduce emissions of greenhouse gases (photosynthesis - the process of plant growth - absorbs CO2). But they have mostly a big handicap: they are still much more expensive than oil.
The European Union encourages the use of biofuels.
The latest European directives 2003 their aim to 2005: 2% biofuels to incorporate into existing fuels (diesel and petrol).
In 2010: 5,75% biofuels.
But for now it is not at all certain that Europe have the agricultural production and distribution capacities to meet these objectives
There are two biofuel families: those used mixed with hydrocarbons (diester and ethanol), and those who use only (vegetable oils)
Diester, better known under the name biodiesel: in addition to or replacement of diesel. It is obtained by reaction between the alcohol (methanol) and vegetable oils (rapeseed, wheat, sunflower, etc ...)
ethanol in addition to petrol: it is obtained by fermentation of sugar (sugar cane, beet), wheat or corn.
Both are already distributed in large part by oil companies because they are already mixed with fuel. (To the tune of about 1% in France) and is not subject to special signage at the pump.
The disadvantage of these biofuels their cost. There needs to be a chemical reaction before using them. Production cost is still high. They can only develop if they are encouraged by economic incentives (tax exemption).
Crude vegetable oils (canola, corn, sunflower):
Used directly as is in the tank, they still posed many technical problems (not sure all engines support the necessary facilities, including injection systems, no more than 10% mixed in the fuel, requires putting up a new distribution channel ...)
Their energy balance is still uncertain: they are a source of air pollution according to ADEME. But they significantly reduce the greenhouse effect.
The challenges of biofuels:
- Risks of overproduction that could lower profitability in the sector
- France would not have sufficient agricultural production capacity to achieve the 5,75% of the EU directive according to specialists (ADEME, UFIP and others ..).
- Biofuel development could give a greater role to farmers in production and can be in the energy distribution (sweet dream Greens and other farmers ...) to solve the problems of rural depopulation.
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