Three recent publications relevant to the alternative fuels industry

Part 1 World energy outlook 2011

Probably not high on your Christmas wish list, and not quite gold, frankincense or myrrh, but the IEA world energy outlook 2011, the National alternative fuels strategy and the supporting CSIRO economic modelling paper have arrived just before a well-deserved break, and offer an interesting read.

The IEA released its annual energy projections in November based on their regular analysis of market trends. These projections represent the most authoritative energy market projections available.

While the range of scenarios presented may not be as clear as crystal, the price paths are useful as they reflect the level of pricing required to incentivise the necessary supply of various energy resources to meet demand (i.e. oil prices need to rise to help investment in new sources of supply). These price paths differ according to policy-driven reductions in demand (i.e. carbon pricing). For example, in the ‘New Policies Scenario’ the oil price essentially doubles from current levels to $212/ barrel in 2035.

Some of the key observations from the IEA world energy outlook include:

• Gas has a growing importance in the global energy mix, with an increasing role in transport – discussed in an earlier IEA publication Are we entering a golden age of gas?
• Natural gas prices have diverged from their long-term correlation with oil prices due to the discovery of unconventional resources (i.e. US shale gas).
• Nearly 90% of global energy demand growth to 2035 is expected in non-OECD countries (i.e. China, India and developing nations).
• China will overtake the US in terms of oil imports shortly after 2020 and will become the largest oil consumer in the world around 2030, consuming 15 million barrels per day by 2035 (out of around 100 million globally) or nearly double their consumption in 2009.
• The global stock of road transport vehicles will almost double by 2035 (China will see a ten-fold increase of 30 to 300 cars per 1000 people) but the adoption of fuel efficiency standards, lower vehicle usage levels and increased use of alternative vehicle technologies means that the increase in transport energy demand is only around 40%.

Overall, the World energy outlook 2011 provides high level information (i.e. Australia is included in the ‘OECD Asia Oceania’ group with Israel, Japan, Korea and New Zealand) but has historically shown inaccuracy when forecasting tries to respond to short-term oil price volatility (e.g. 2008). However, the forecasts are one of the most trusted sources available and the historical analysis regularly provides a graphical ‘treat’ to effectively illustrate a thought-provoking trend in global energy use. The importance of understanding world energy markets is increasingly important for transportation as it transitions to multiple forms of energy (gas, coal, renewables, biomass, etc.).