Shell Sees Three Hard Truths for the Future

 

U.S.News & World Report: Shell Sees Three Hard Truths for the Future

April 14, 2008 11:34 AM ET

Shell, which for 40 years has been writing future scenarios as a way of grappling with the forces shaping its industry, already has gotten a great deal of attention for its latest set—the first time the giant oil company has concluded that there actually is a preferred course. The scenarios are called “Scramble” and “Blueprints,” and they suggest that from looking at current global dynamics, nations will either be fighting each other for dwindling resources or will chart a course for international cooperation on energy and climate.

I had an opportunity to talk to Shell’s chief economist, Jeremy Bentham, about the scenarios. Although I’ll share the bulk of the interview in a later post, I thought it was worth considering what he called the “three hard truths” that underlie both of the future scenarios, as Shell sees it.

The starting point for this part of the discussion was a population-weighted map of the world, much like the one here at Strange Maps. Of course, everyone knows the huge role that the populations of China and India play in the global economy, but Bentham put the energy implications into sharper focus.

“These population giants are entering their most energy-intensive phase of growth,” he said. “In their pre-industrialization phase, their economies were growing without using a huge amount of extra energy. But now they’re coming into their mobilization and industrialization phase, and their energy use grows very rapidly. And then, at a later point, they go into a more service-oriented phase, and it slows down again.”

He pointed out that the United States, although “immensely energy-inefficient compared to other nations,” has had slow growth or flat energy use per capita for years.

There are three hard truths growing out of the current situation, Bentham argues:

• “First, there is a surge in energy demand. It’s actually created discontinuity in the world energy economy because for decades the growth in the world economy was actually the growth in the advanced economies in their service type of period. So while you needed more energy for each extra bit of economy, you needed smaller and smaller increments. So over time, the amount of extra energy you required was declining, but since the turn of the decade it’s been increasing, because world economic growth has a bigger component of these emerging nations.”

• “Second, the conventional oil—the easy oil and gas, the accessible oil and gas—will struggle to grow at that pace. This will create the need for additional energy to be developed and for energy efficiency to play an important role in the future.”

• “The third hard truth is the environmental stresses are increasing, clearly with that extra population and extra use of energy. Currently, of course, very high on the agenda are climate issues, and we deal with those. There are also water issues, and a whole set of environmental issues. Those are the three hard truths that will play through all of our scenarios.”

More on the Shell scenarios to come.

Marianne Lavelle, senior writer for U.S.News & World Report, has covered energy since California’s rolling blackouts and the simultaneous rise of two former oilmen to the White House. While she may not always seem to share Sen. Robert Byrd’s enthusiasm for the black “diamonds under our feet,” she grew up on Coal Street in Pennsylvania’s Carbon County, where she followed her high school basketball team’s triumphs in the Anthracite League. But by then, those names were mere tributes to a bygone era of prosperity, smoky railroads, and underground hazards. Today, to helpfully remind her there is no painless solution to the nation’s fuel problem, her conservation-minded husband keeps their home chilly in the winter and sweltering in the summer. But she is ever heartened by the one force that can both absorb and generate energy, their young daughter.

http://www.usnews.com/blogs/beyond-the-barrel/2008/04/14/shell-sees-three-hard-truths-for-the-future.html

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