Period of high energy costs, economic volatility ahead - Shell

14 February 2011 15:19  [Source: ICIS news]

LONDON (ICIS)--The world is facing a period of volatile energy and commodity prices as well as intensified economic cycles, oil giant Shell said on Monday.

“The recession interrupted the oil and commodity price boom but it may return,” Shell added on the release of an updated set of energy scenarios.

“We believe that the world is entering an era of volatile transitions and intensified economic cycles.”  

Shell suggests that the supply of easily accessible oil and gas will not be able to match the growth in demand by the end of this decade, while coal and biofuels will not be able to completely resolve supply/demand tensions.

The company sees no “silver bullet” that might provide a solution to the world’s energy needs.

China and India’s continued material development and a tighter market will put pressure on prices and lead to greater volatility, Shell says.

The International Monetary Fund (IMF) on Monday said that China’s was the world’s second-largest economy after the US in 2010, but that it was in 93rd place in terms of GDP per head of population at purchasing power parity. India was 11th and 127th respectively in these lists.

“Improvements in policy-making and strong gains in productivity have helped economies to grow without inflation in the last two decades,” Shell said. “We do not believe the moderating effect of this combination of good policies, good practices, and good luck will continue into the future.”

Shell’s “Signals and Signposts” report presents alternative energy scenarios and updates earlier work, released in 2008, by taking into account the impact of the financial and economic crisis.

The company suggests that heightened collaboration between business, the public sector and civil society is needed to address energy and environmental challenges. “We must widen and deepen the debate across industry and geographical boundaries,” it says.

Energy demand could triple between 2000 and 2050, it suggests, if emerging economies follow historical patterns of development. But that demand growth could be moderated by about 20% through innovation and competition.

Energy production could be lifted by ordinary rates of growth by about 50% but that would still leave a gap equivalent to the entire energy business in 2000 - around 400 EJ/a (exa joules/year). An exa equates to 10 to the power of 18.

“This gap - this Zone of Uncertainty - will have to be bridged by some combination of extraordinary demand moderation and extraordinary production acceleration,” Shell says.

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By: Nigel Davis
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