Analysis of the show: Living without oil
presented by Anne-Sophie Mercier and Matthias Beermann and broadcast the 11 September 2004.
Have Europeans prepared to limit their vulnerability? The answers of Jacques Attali.
I - THE GENERAL IDEA:
Our economies and our way of life are strategically dependent on the abundance of cheap oil. But this abundance is limited in time, the supply costs will inevitably increase. The Europeans first experienced it with the oil shock of 1973, discovering the painful vulnerability of our companies at the price of a barrel of crude oil. But since this shock, and despite regular crises in the oil market, hydrocarbons have returned to a low price, and Europe has forgotten to prepare for the end of oil.
The need to fight global warming by limiting greenhouse gas emissions is a new motivation to look for alternatives to all oil. Yet, 30 years after the first oil shock, little has been done: Europe is still vitally dependent on the abundance of cheap oil.
II - INFORMATION ELEMENTS
1- THE CONTEXT OF THE LAST MONTHS:
THE SUSTAINABLE TREND WITH THE PRICE OF THE OIL BARREL.
Crude prices have crossed the $ 40 mark for several months, and are approaching $ 50 ($ 47 on August 24 in New York). The average price since the first oil shock is $ 20 a barrel. With a barrel at $ 40, in constant currency, we remain below the shock prices of 1973 or 1979 ($ 80 per barrel during the Iranian crisis).
On the last 4 months, gasoline and diesel increased by 10 cents at the pump, about + 10%
NB: It is interesting to note that the real average cost price of a barrel of oil is less than $ 10.
Reasons given for this price increase:
–Exponential increase in global demand, which is not decreasing in Europe, is increasing in the US, and exploding in China, with the growth of the car fleet and the very strong Chinese growth.
–Instability of the offer : crisis in Iraq (although exports have resumed in the south of the country) and tensions in the Middle East, uncertainty in Venezuela (resolved since the end of August after the success of Chavez in the referendum), uncertainty in Russia, with tax, judicial (and political) problems of the Russian leader Youkos, threatened with dismantling and bankruptcy while producing 2% of the world supply.
–Insufficient infrastructure. With the exception of Saudi Arabia, OPEC member countries have not optimized their production capacity. On the other hand, there are tensions on the refining infrastructure: the number of refineries is insufficient to process all the oil extracted, especially in the US, hence the rise in prices.
However, not everything is clear: some are surprised at the current supply shortage when all the producers are producing to the maximum of their capacities (notably OPEC). Some accuse the US and the majors of hiding and storing some of their reserves.
Others put forward price speculation: it seems that speculators, after the explosion of the very profitable internet bubble-new technologies, have fallen back on oil, one of the last sectors where we can make lots of money. The evolution of barrel prices is therefore highly dependent on speculation, which is very sensitive to the international economic and political context, which aggravates the already existing tensions in the oil supply.
1 - this increase is felt less harshly in Europe, due to the strength of the Euro against the $.
2 - this context of rising prices also makes people happy.
It is very profitable for the big oil companies: the results of the majors are in very strong increase these last months (especially as the refining margins increase too): + 30% for Total, + 38,8% for Exxon Mobil, + 16% for Shell.
Producing countries are also benefiting: Saudi Arabia has forecast a budget surplus of $ 35 billion for 2004. (but it is asking for a lower price per barrel, at around $ 30).
According to INSEE, a barrel at $ 50 would cost 0,24 points of growth because investment and consumption would be penalized.
Logically, those who suffer from these prices are the transport companies, air, road and maritime. Air France has increased these prices from 2 to 12 euros according to destinations.
2- WHEN IS OIL ENDED?
We currently produce 75 million barrels each day. Each year we burn what nature took a million years to build.
No one agrees to assess the reality of the world's oil reserves.
But the debate, although limited to oil professionals and experts, is virulent: when will we pass the PEAK OIL, the beginning of the decline of the reserves? Some say today. The most optimistic advance 2050. The debate schematically opposes scientists (pessimists) to economists (optimists).
The most common estimates are based on Hubbert's method. King Hubbert is an American geologist who, in 1956, precisely predicted for 1970 the decline in production in the United States by observing the evolution of production as a bell curve.
In general, the evaluation of a field is a probability calculation. No certainty.
Nature (November 2003): according to a study commissioned by the British major BP, at constant consumption, there remains 40 years of oil, 60 years of gas, 230 years of coal. Two generations.
There are "cousins" of oil that are already mobilized such as unconventional oils - Canadian tar sands or extra heavy crude oil from Venezuela. They represent about 25 years of consumption. But their exploitation is more expensive and above all more polluting than oil.
The conventional oil reserves not yet discovered are estimated on average at 3 billion barrels (US source: Geological survey's world petroleum assessment - 000), or 2000 years of additional consumption.
Technical progress allows better recovery of existing resources. Today, on average, only a third of the resources in place are recovered. The 1 point increase in the average recovery rate represents 2 years of additional consumption.
On the other hand, thanks to the increase of the barrel, some deposits hitherto unexploited because too expensive become profitable again.
One of the most active players in the debate about the reality of oil reserves is ASPO, the Association for the study of the peak oil. It brings together former senior oil exploration officials and geologists, and says the falsification of official reserves data is systematic. According to ASPO, for example, OPEC reserves would be overestimated by 46% (because OPEC countries index their production quotas to their declared reserves: the more they declare, the more they can produce).
ASPO estimates that it is storing 1000 billion barrels of reserves.
The Shell case has recently proved that the company has been heavily penalized on the stock markets for overvaluing its own reserves.
Note: there will always be oil, but the cost of its extraction will be too important: it does not run to the dry out, but rather to the explosion of prices.
The exponential increase in demand
One barrel of oil = 159 liters. We consume 29 billion barrels a year.
Oil still represents 42% of total energy production, 23% for natural gas, ie 65% of hydrocarbons (8% for nuclear).
Transportation still depends on 96% of oil (according to OECD).
And oil is not only a source of energy: it is also essential for food, chemicals, medicines, clothing, and all the plastic products around us.
As a direct consequence of population growth and the gradual rise in living standards, global demand for primary energy should continue to increase by 2030; it could reach 15 gigabyte tonnes of oil equivalent (Gtoe) in 2030 (compared to 9 Gtoe today), representing a growth rate of 1,7% per year (reference scenario of the International Energy Agency). Over the whole period, this increase in demand will be mainly due to developing countries which will experience an increase in their needs of 140% against only 34% for OECD countries.
Today, 50% of oil is used for transport (compared to only 36% in 1973) and petroleum products constitute 96% of the energy used in road transport. Alternative energies exist (NGV, LPG, oxygenated fuels of chemical or agricultural origin, etc.) and have been used for some for a very long time, but they represent less than 2% of the total energy of transport: there there will be no substitution for oil which is economically and massively competitive over the next 20 to 30 years.
Little hope with the current alternative energies.
To meet the growing demand, it will be necessary to mobilize all sources of energy, to supplement oil more than to compete with or replace it. However, the share of renewable energies in the global energy balance (including hydraulics) should remain relatively stable (around 5% according to the IEA), despite strong growth in certain sectors such as photovoltaic solar or wind.
The establishment of strong incentive policies could undoubtedly increase the share of these energies, but it would be difficult to make them, by 2020-2030, a massive substitute for fossil fuels, notably for cost reasons.
Conclusion: the contribution of hydrocarbons to meeting global energy needs will remain high (65% compared to around 62% today), the share of natural gas becoming more substantial.
3 - DEPENDENCE ON EUROPE
The enlarged Union will consume 2004 20% of world oil production.
The European economy is based on fossil fuels: oil and gas make up 4 / 5 of our total energy consumption. We import the 2 / 3. And this proportion should increase: with the gradual depletion of resources in the North Sea, Britain has again become a net oil importer in August 2004.
In 2030, according to the European Green Paper for Energy, oil could be imported up to 90% of our consumption. Due to lack of own resources, the EU has no alternative: it must act on the demand for energy (by reorienting or controlling it, unlike the USA, which in their energy plan has decided to rely on always increasing, as evidenced by their international policies in the Middle East and West Africa).
The priority action for energy savings: transport, since they represent 32% of energy consumption and 28% of CO2 emissions.
For now, the only goal of governments is to limit the upward trend in demand. The fiscal weapon could be effective, but it is already widely used.
4 - BIOFUELS
Biofuels have a double advantage: they reduce oil consumption and reduce greenhouse gas emissions (photosynthesis - the process of plant growth - absorbs CO2). But above all they have a big handicap: they are still much more expensive than oil.
The European Union encourages the use of biofuels.
2003's latest European directives set a target for 2005: 2% of biofuels to be incorporated into existing fuels (diesel and gasoline).
For 2010: 5,75% of biofuels.
But for the moment it is not at all certain that Europe has the capacity for agricultural production and distribution to fulfill these objectives.
Two families of biofuels must be distinguished: those that are used mixed with hydrocarbons (diester and ethanol), and those that are used alone (vegetable oils)
The diester, better known as biodiesel: in addition or replacement of diesel. It is obtained by reaction between alcohol (methanol) and vegetable oils (rapeseed, wheat, sunflower, etc.)
ethanol in addition to the essence: it is obtained by fermentation of sugar (sugar cane, beet), wheat or maize.
Both are already distributed largely by the oil companies because they are already mixed with fuel. (about 1% in France) and are not subject to special signage at the pump.
The disadvantage of these biofuels: their cost. A chemical reaction must be done before they can be used. Their cost of production is still high. They can only develop if they are encouraged by economic incentives (tax exemption).
Crude vegetable oils (rapeseed, wheat, sunflower):
Used directly as such in the tank, they still pose a number of technical problems (not sure that all engines support them, necessary adjustments, especially for injection systems, no more 10% mixed in the fuel, requires to put in place a new distribution circuit ...)
Their energy balance is still uncertain: they would be a source of air pollution according to the ADEME. But they significantly reduce the greenhouse effect.
The challenges of biofuels:
- risks of overproduction which could lower the profitability of the sector
- France does not have sufficient agricultural production capacity to reach 5,75% of the European directive according to specialists (ADEME, UFIP and others ...).
- the development of biofuels could give a greater role to farmers in production and perhaps in energy distribution (sweet dream of the Greens and other farmers…) to solve the problems of rural exodus.
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