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Shell CEO warns of global energy supply shortage this decade

July 11, 2011, 1:54am

PETALING JAYA, Malaysia – This decade would be another defining moment for the global energy sector as warning of probable supply shortage had been raised – a scenario which may drive prices to extreme volatilities for the next round.

In a roundtable briefing with selected Asian journalists here, Royal Dutch Shell plc Chief Executive Peter Voser indicated high likelihood of shortages in energy supply in the next 5 to 7 years saying, “demand will outpace available supply in the years to come.”

If consumers are already distressed with the extreme swings in pump prices, which very often are on upward trends, market analysts could only guess how prices would exhibit even more explosive spikes if the anticipated demand climb would outstrip available energy supply.

Voser stressed that the gestation period for investments on meeting future supply will take longer lead time, and project development cycles may not be able to keep pace with what could be a faster rate on demand growth.

The energy sector, primarily the oil industry, already went through several boom-bust cycles. The last one that jolted oil markets had been in the last decade, chiefly between the periods from 2005 to 2008, when China’s sudden economic demand expansion set extreme pressure on supply, hence, resulting in oil’s record prices which peaked at $147 per barrel in July 2008.

To soften the impact, Voser noted that there should be somebody to meet supplies, and that is the area where industry players like Shell would be coming in with their investments.

“The decisions we make around energy use will determine whether we will face a period of extraordinary opportunity for policymakers, businesses like ours and for a society at large. Or whether it will be a period of extraordinary misery, as price shocks and knee-jerk policy reactions impact our ability to produce and consume energy smartly,” Voser said.

To close supply-demand gap, he noted that industry stakeholders could either decide to pursue “enormous ramping up of energy supplies, or a dramatic curbing of demand” or do a mix of both. He stressed that among Shell’s scenario planners, they call such “a zone of uncertainty.”

Further asserting that the coming years will be an “era of volatile transitions,” the Shell chief executive pointed out that one noteworthy prospect would be the fact that the focus of anticipated demand growth will be in developing countries, primarily in Asia.

“One such transition will be the shifting of energy demand from West to East … from the developed to the developing world in general, but Asia in particular,” he said.

Voser added that “a major contributor to this surging energy demand will come from the quest for mobility among Asia’s growing middle class,” indicating further that the volume of vehicle additions will mostly be in Asia’s roads.

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