A Global Perspective on Energy Markets and Economic Integration Presented to the: Association for University Business and ...
Economic Prosperity and Stability Require Access to Reliable and Affordable Energy Source: Royal Dutch Shell, “Exploring t...
Real Oil Prices Have Varied Considerably and Affect Economic Well Being Source:  BP Statistical Review of World Energy Jun...
Future Oil Price Expectations are  Driven by Recent History  $2002 US/Barrel
While Oil’s Share of GDP Declined Since 1973 It May Becoming More Important (US) Paul Sarkey, A Scratched Record: Oil Pric...
Over the Near to Medium Term, Oil and Gas Markets Face Many Uncertainties <ul><li>What will be the effect of </li></ul><ul...
Over the Longer Term, World Energy Demand and Carbon Emissions will Grow Over 40 Percent Energy Demand Carbon Dioxide Emis...
The Climate Change Policy Problem is Enormous <ul><li>The theoretical climate change relationship is between  atmospheric ...
Current Fossil Alternatives are Hydro/Renewables and Nuclear, with Carbon Sequestration being Explored Source:  USDOE EIA ...
Carbon Sequestration Technologies  will Add Costs to Fossil Fuels Using Integrated Gasification Combined Cycle Capture Cos...
Over the Longer Term,  Electricity Demand will Grow Almost 60% and Developing Countries will Account for 2/3 of the Increa...
Current Renewable Electricity is Largely Hydro  Source:  Renewable Information 2002, IEA Solar Wind Geothermal Etc.
Nuclear Contributes to Electric Power in Many Countries Percent Share 2003
New Nuclear Electricity Plants  are Cost Competitive in US, Depending on Capital Cost and Perceived Risk
Dependence on Oil and Gas Trade will Grow Considerably Source:  World Energy Outlook 2004, IEA
US Oil Production will Stabilize, While Net Imports will Grow 60% Petroleum Production Petroleum Product Imports Crude Oil...
US Natural Gas Production will Grow 13% Imports will Grow 157% Other Imports Production Source:  DOE/EIA AEO2005 TCF LNG I...
US Energy Use Will Grow 31% by 2025 Source:  DOE/EIA AEO2005 Oil Renewables /Hydro Nuclear Coal Natural Gas
US Electricity Generation will Grow By 42% Coal Nuclear Natural Gas Renewables Source:  DOE/EIA AEO2005 Oil Billion kWh
World Conventional Proved Fossil Fuel Reserves are Geographically Concentrated    Source:  EIA 2003. Excludes Oil  Sands. ...
A Wide Range of Prospects for Alternative Liquid Fuels, But will Take Time to Develop Illustrative Oil Production Costs Il...
National Economies are Becoming Increasingly Intertwined Source:  The World Bank, 2004. Trade in Goods (% of GDP) Gross Pr...
So are Manufacturing Processes Source:  Wall Street Journal, June 9, 2005, p. B1
And Even Universities <ul><li>Study Abroad - Singapore has courted top-tier schools: </li></ul><ul><li>1998:  French busin...
And this Trend Toward  Interdependency will Accelerate  <ul><li>The Internet and silicon revolution will continue to break...
And this Trend Toward  Interdependency will Accelerate  (continued)   <ul><li>Scope for national public policies with majo...
And this Trend Toward  Interdependency will Accelerate  (continued)   <ul><li>Supply and demand shocks will be transmitted...
Some Governments and Car Companies  are Aiming for a Hydrogen Economy  <ul><li>Hydrogen may solve many problems : </li></u...
Over Several Decades,  Advanced Energy Technologies could “Disrupt” the Current System <ul><li>Nanotechnology has the pote...
Conclusions <ul><li>Over the nearer term </li></ul><ul><ul><li>Many uncertainties in oil and natural gas markets remain </...
Conclusions   (continued) <ul><li>At the same time </li></ul><ul><ul><li>Both economic competition and cooperation will in...
Conclusions   (continued) <ul><li>International flexibility, cooperation and partnering on many fronts, including public p...
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"Energy, Economic and Environmental Security"

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  • Gas to Liquids (GTL): Potentially viable for countries with “stranded” or very cheap natural gas. South Africa has 1000 bbls/day and is planning one at 70,000 bbls/day. Qatar (Shell) constructing 140,000 bbls/day GTL facility. Commercially viable for oil prices above 20$/bbl and &lt;1.00 $/MBtu natural gas. GTL inherently cleaner than oil based fuels. Potentially viable for countries with “stranded” or very cheap natural gas. Coal to Liquids (CTL): CTL plants in South Africa supply 30% of domestic demand. Claimed viable in S. Africa for oil prices &gt; $30/bbl. Promising option for countries with abundant coal reserves. China planning two 50,000 bbls/day facilities located at mine mouth. Estimated cost of product is 22 $/bbl equivalent oil. One ton coal ~ 2.6 bbls diesel. Sulfur content as low as 5 ppm compared to some diesel currently used in China with 2000 ppm. Biomass to Liquids (Ethanol): Brazil producing 15.7 million liters/year @ cost of 20-30 cents/liter from sugar cane. EU targeting 5.7% biofuel use by 2010; US targeting 5% by 2010. Meeting US target will require 25% of all corn and 10% of cropland. IEA estimates demand will reach 2 mbd by 2025 compared to worldwide demand of 114 mbd.
  • "Energy, Economic and Environmental Security"

    1. 1. A Global Perspective on Energy Markets and Economic Integration Presented to the: Association for University Business and Economic Research (AUBER) “ 59 th Annual AUBER Fall Conference: Energizing the Economy” October 9, 2005 Presented by: Dr. Arnold B. Baker President, International Association for Energy Economics Chief Economist, Sandia National Laboratories Phone: 505-284-4462 Fax: 505-844-3296 Email: [email_address] Sandia is a multiprogram laboratory operated by Sandia Corporation, a Lockheed Martin Company, for the United States Department of Energy under contract DE-AC04-94AL85000.
    2. 2. Economic Prosperity and Stability Require Access to Reliable and Affordable Energy Source: Royal Dutch Shell, “Exploring the Future – Energy Needs, Choices and Possibilities”
    3. 3. Real Oil Prices Have Varied Considerably and Affect Economic Well Being Source: BP Statistical Review of World Energy June 2005
    4. 4. Future Oil Price Expectations are Driven by Recent History $2002 US/Barrel
    5. 5. While Oil’s Share of GDP Declined Since 1973 It May Becoming More Important (US) Paul Sarkey, A Scratched Record: Oil Price Upgrade, DeutscheBank, July 11, 2005 Real Oil Prices and Oil’s Share of US GDP
    6. 6. Over the Near to Medium Term, Oil and Gas Markets Face Many Uncertainties <ul><li>What will be the effect of </li></ul><ul><li>Iraqi Domestic instability on Iraqi oil production </li></ul><ul><li>Negotiations surrounding Iranian nuclear technology on Iranian oil supplies </li></ul><ul><li>Saudi commitment to expanded oil production </li></ul><ul><li>President Putin’s policies on Russian oil and natural gas supplies </li></ul><ul><li>President Chavez’s policies on Venezuelan oil supplies </li></ul><ul><li>Higher oil prices on world economic growth </li></ul><ul><ul><li>Effect of economic growth on oil demand in China, India, U.S., etc. </li></ul></ul><ul><li>Higher oil prices on non-OPEC oil supplies </li></ul><ul><li>Katrina’s impact on crude and refined products </li></ul>
    7. 7. Over the Longer Term, World Energy Demand and Carbon Emissions will Grow Over 40 Percent Energy Demand Carbon Dioxide Emissions and Developing Countries will Account for 70 % of the Increase Source: USDOE EIA IEO 2004 Reference Case
    8. 8. The Climate Change Policy Problem is Enormous <ul><li>The theoretical climate change relationship is between atmospheric concentrations of GHG and climate change, not annual emissions </li></ul><ul><li>According to the Intergovernmental Panel on Climate Change, stabilizing atmospheric concentration of GHG at current levels would require permanent emissions reductions of 60% or more below current levels </li></ul><ul><ul><ul><li>Kyoto Protocols: Industrialized countries agreed to reduce emissions, on average, 5.2% from 1990 levels by 2008-2012 </li></ul></ul></ul>
    9. 9. Current Fossil Alternatives are Hydro/Renewables and Nuclear, with Carbon Sequestration being Explored Source: USDOE EIA IEO 2004 Reference Case World Energy Demand
    10. 10. Carbon Sequestration Technologies will Add Costs to Fossil Fuels Using Integrated Gasification Combined Cycle Capture Cost Ranges Source: David, 2000 Sources: Heddle et al., 2003. $25/Ton CO2 = About $13/bbl Oil CO2 Seq. < $3/Ton CO2 (2015) USDOE Program Target
    11. 11. Over the Longer Term, Electricity Demand will Grow Almost 60% and Developing Countries will Account for 2/3 of the Increase Source: USDOE EIA IEO 2004 Reference Case
    12. 12. Current Renewable Electricity is Largely Hydro Source: Renewable Information 2002, IEA Solar Wind Geothermal Etc.
    13. 13. Nuclear Contributes to Electric Power in Many Countries Percent Share 2003
    14. 14. New Nuclear Electricity Plants are Cost Competitive in US, Depending on Capital Cost and Perceived Risk
    15. 15. Dependence on Oil and Gas Trade will Grow Considerably Source: World Energy Outlook 2004, IEA
    16. 16. US Oil Production will Stabilize, While Net Imports will Grow 60% Petroleum Production Petroleum Product Imports Crude Oil Imports Source: DOE/EIA AEO2005 MMB/D
    17. 17. US Natural Gas Production will Grow 13% Imports will Grow 157% Other Imports Production Source: DOE/EIA AEO2005 TCF LNG Imports
    18. 18. US Energy Use Will Grow 31% by 2025 Source: DOE/EIA AEO2005 Oil Renewables /Hydro Nuclear Coal Natural Gas
    19. 19. US Electricity Generation will Grow By 42% Coal Nuclear Natural Gas Renewables Source: DOE/EIA AEO2005 Oil Billion kWh
    20. 20. World Conventional Proved Fossil Fuel Reserves are Geographically Concentrated Source: EIA 2003. Excludes Oil Sands. * Less than 0.4 % (Percent Share) 100 100 100 Total 38 26 21 ROW 9 * * India 25 3 2 U.S. 12 1 2 China * 2 5 Venezuela 16 28 6 Russia 0 15 2 Qatar 0 3 6 UAE 0 1 10 Kuwait * 15 10 Iran 0 2 11 Iraq 0 4 25 Saudi * 40 64 Key P.G. Coal Gas Oil Region
    21. 21. A Wide Range of Prospects for Alternative Liquid Fuels, But will Take Time to Develop Illustrative Oil Production Costs Illustrative Alternative Fuel Production Costs
    22. 22. National Economies are Becoming Increasingly Intertwined Source: The World Bank, 2004. Trade in Goods (% of GDP) Gross Private Capital Flows (% of GDP)
    23. 23. So are Manufacturing Processes Source: Wall Street Journal, June 9, 2005, p. B1
    24. 24. And Even Universities <ul><li>Study Abroad - Singapore has courted top-tier schools: </li></ul><ul><li>1998: French business school INSEAD </li></ul><ul><ul><li>Offers MBA, executive education </li></ul></ul><ul><li>2000: University of Chicago </li></ul><ul><ul><li>Graduate School of Business opens a Singapore campus </li></ul></ul><ul><li>2003: Johns Hopkins Singapore </li></ul><ul><ul><li>Operates as a full division of the university </li></ul></ul><ul><li>2003: Duke </li></ul><ul><ul><li>Medical school agrees to open a school at the National University of Singapore </li></ul></ul><ul><li>2005: MIT </li></ul><ul><ul><li>Grants engineering master’s degrees in a joint venture with two Singaporean universities </li></ul></ul>Source: Wall Street Journal, July 12, 2005, p. B1
    25. 25. And this Trend Toward Interdependency will Accelerate <ul><li>The Internet and silicon revolution will continue to break down communication and economic barriers </li></ul><ul><ul><li>Greater numbers of countries will participate in the world economy and financial markets </li></ul></ul><ul><ul><li>Integrated supply chain logistics of service & manufacturing industries will seamlessly cross national borders </li></ul></ul><ul><ul><ul><li>As will distance education and technology transfer </li></ul></ul></ul><ul><li>Both global economic competition and global economic cooperation will intensify </li></ul>
    26. 26. And this Trend Toward Interdependency will Accelerate (continued) <ul><li>Scope for national public policies with major economic impact will become more limited </li></ul><ul><ul><li>Can’t afford to have costs out of line with competitor countries </li></ul></ul><ul><ul><li>Growing need to send domestic energy consumers and producers consistent market signals, and to integrate domestic energy security, environmental and economic objectives and polices </li></ul></ul><ul><ul><li>Driven toward greater policy and regulatory harmonization (lowest common denominator?) </li></ul></ul>
    27. 27. And this Trend Toward Interdependency will Accelerate (continued) <ul><li>Supply and demand shocks will be transmitted more rapidly </li></ul><ul><li>Country Global Market Country </li></ul><ul><li>Science and technology developments will accelerate and transcend high tech national borders </li></ul><ul><ul><li>But they are unlikely to “solve” energy and environmental problems any time soon </li></ul></ul>
    28. 28. Some Governments and Car Companies are Aiming for a Hydrogen Economy <ul><li>Hydrogen may solve many problems : </li></ul><ul><ul><li>Lowered, or even zero, carbon emissions </li></ul></ul><ul><ul><li>Energy security </li></ul></ul><ul><ul><li>Limited fossil fuels and uneven distribution </li></ul></ul>Source: Fuelcell.org Source: GM <ul><li>Many hurdles to overcome : </li></ul><ul><ul><li>Lifetime of fuel cell </li></ul></ul><ul><ul><li>Economic hydrogen production </li></ul></ul><ul><ul><li>Lack of hydrogen infrastructure </li></ul></ul><ul><ul><li>Sequestration of carbon if hydrogen derived from fossil fuels </li></ul></ul><ul><ul><li>Unlikely to be cost competitive until at least mid 2020s </li></ul></ul>
    29. 29. Over Several Decades, Advanced Energy Technologies could “Disrupt” the Current System <ul><li>Nanotechnology has the potential to fundamentally change energy supply and demand </li></ul><ul><li>Examples : </li></ul><ul><ul><li>Solid State Lighting Using “Quantum Dots” could cut power for lighting use by 50% </li></ul></ul><ul><ul><li>Ultra-high strength lightweight nanophase materials could improve car, airplane efficiency </li></ul></ul><ul><ul><li>Nanoparticles and Nanoarchitectures for Energy Conversion and Storage may offer solutions to low cost fuel cells and batteries </li></ul></ul>Lauren Rowher, SNL
    30. 30. Conclusions <ul><li>Over the nearer term </li></ul><ul><ul><li>Many uncertainties in oil and natural gas markets remain </li></ul></ul><ul><li>Over the longer term </li></ul><ul><ul><li>The world economy and its energy markets will become increasingly integrated and interdependent </li></ul></ul><ul><ul><li>Energy use and carbon emissions will grow substantially, driven by the developing world, and mostly fueled by fossil energy </li></ul></ul><ul><ul><li>The potential for oil and natural gas supply shocks will grow, as will the economic transmission of those shocks </li></ul></ul><ul><ul><li>Oil and natural gas price instability will increase </li></ul></ul><ul><ul><li>Major new energy technology platforms that transform economies and energy could emerge </li></ul></ul>
    31. 31. Conclusions (continued) <ul><li>At the same time </li></ul><ul><ul><li>Both economic competition and cooperation will intensify </li></ul></ul><ul><ul><li>Scope for national public policies with major economic impact will become increasingly limited </li></ul></ul><ul><ul><li>Need for clear domestic consumer-producer energy price signals and consistent energy security, environmental and economic objectives and policies will grow </li></ul></ul><ul><ul><li>Pressure for policy and regulatory harmonization will increase, as will requirements for decision-making speed, and the cost of mistakes will grow </li></ul></ul>
    32. 32. Conclusions (continued) <ul><li>International flexibility, cooperation and partnering on many fronts, including public policy and science & technology investment, will be critical to </li></ul><ul><ul><li>Avoid bumps in the road </li></ul></ul><ul><ul><li>Support national political economic security </li></ul></ul><ul><ul><li>Improve the health and well being of the developing world </li></ul></ul><ul><ul><li>Provide a foundation for global and regional prosperity and environmental sustainability </li></ul></ul>
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