Though the focus of the IEA report was energy investment, what came across was the spectre of peak oil. The agency sees the brief US shale boom “running out of steam” in the 2020s, forcing the world back into the arms of the Middle East where there is a risk that “investment fails to pick up in time to avert a shortfall in supply”.
The numbers show the oil and gas industry sprinting to stand still: “More than 80% of the cumulative $17.5 trillion in upstream oil and gas spending is required to compensate for decline at existing oil and gas fields.” Other analysts have shown that without the recent rise in US output, global oil production would have stagnated already. Any interruption of exports from Iraq – where al-Qaida-linked insurgents are advancing on Baghdad – would drive the oil price higher.
Coal is in greater abundance and remains cheaper to extract than oil and gas, yet the cost in terms of emissions and pollution is extraordinarily high. The US EPA ruling that coal and gas plants must cut CO2 emissions to 30 percent below 2005 levels by 2030 may prove a tipping point. The US target is a long way short of what’s needed to keep global emissions below 2oC, but it is a landmark decision. China quickly followed suit by announcing a potential future cap on its coal use.
There was good news too from the International Renewable Energy Agency (IRENA), which claimed that renewables could top 30% of the global energy mix by 2030. And the falling cost of renewables is starting to disrupt markets, as demonstrated by Barclays’ recent downgrade of the entire US utilities sector in the face of the solar ‘threat’. In China, the cost of power from solar could match coal within two years, according to one manufacturer.
Slowly but surely, it would seem the tables are turning!
Author: Simone Osborn
Co-editor, Energy Crunch
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