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Shell predicts two decades of rising energy prices

The Independent: Shell predicts two decades of rising energy prices

By Michael Harrison

07 June 2005

Worldwide energy prices are set to rise over the next two decades as individual countries become more concerned about ensuring security of supply and governments take a more pro-active role in dictating energy policy and regulating markets, according to the latest global outlook from the oil giant Shell.

Its “global scenarios” report, the first to be produced since the twin shocks of the terror attacks of 11 September 2001 and the Enron scandal, also suggests that Shell in common with other oil majors will place more emphasis on developing renewable energy sources such as wind and solar than extracting more hydrocarbons through unconventional means.

The report outlines three potential scenarios up to 2025. Under the first, “low trust globalisation”, world economic growth is assumed to be 3.1 per cent and as the process of globalisation continues, it is fettered by a much stronger regulatory role for governments and stricter curbs on cross-border movement of people, goods and knowledge. The second, “open doors”, envisages stronger growth of 3.8 per cent as the markets provide solutions to the twin crises of security and trust sparked by events such as 9/11 and Enron and the only restraint on exploiting new energy sources is the investment available.

The third, “flags”, depicts a world in which nation states retreat into their shells and conflicts put a brake on globalisation, resulting in annual growth of just 2.6 per cent.

Albert Bressand, the vice-president of global business environment at Shell and the report’s main author, said that under each of the scenarios security of supply assumed greater importance, “potentially leading to far more politicised energy relations and creating new sources of tensions among countries”.

The “flags” scenario may increase development of expensive forms of renewable energy, such as wind, as states sought to ensure indigenous supplies, the “open doors” scenario was likely to produce the biggest rise in the cost as growing demand drove up prices.

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