Energy Futures: The Scramble and the Blueprints

Shell Energy Futures: The Scramble and the Blueprints

A recent letter from the CEO of Shell, Jeroen van der Veer, to the company's employees, reproduced at TOD January 25, notes the challenges coming in the future of energy, particularly the two-pronged dilemma: supply and demand, on the one hand, and carbon dioxide emissions, on the other. How is Shell, and indeed the world, going to proceed in the face of these challenges? What are the options for action? Van der Veer paints a picture of two models for the future, which he calls “Scramble” and “Blueprints”.

"In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast.

Taking the path of least resistance, policymakers pay little attention to curbing energy consumption - until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.

The other route to the future is less painful, even if the start is more disorderly. This Blueprints scenario sees numerous coalitions emerging to take on the challenges of economic development, energy security and environmental pollution through cross-border cooperation.

Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes and other policy instruments to improve the environmental performance of buildings, vehicles and transport fuels.

As calls for harmonization increase, policies converge across the globe….

The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driving seat. And governments will determine whether we should prepare for a bitter competition or a true team effort."

Hard-nosed realism meets enlightened liberalism, surely: “bitter competition or a true team effort”. As any student of international relations knows, these two scenarios do not cover the range of options for analyzing the situation. Yet they do point to two distinct policy directions, which themselves suggest two quite different futures for global politics. Does peak oil portend a period of resource wars and muddling through, or an era of cooperation in the common interest?

Surely, the future reality is likely to be somewhere between these extremes. Regional energy agreements will generally be easier to construct, and more effective, than global ones. This does not necessarily bode well for world peace, of course. And there is no doubt that even within cooperative arrangements, competition is a fact of politics, and will be a fundamental element of whatever cooperative arrangements are made.

In the interests of opening this up a bit, this blog site will begin a list of nodes for “Energy: The Prospects for Cooperation”. Rather than trying to distinguish regional from global agreements, the entries will indicate the number of states that are party to the agreements.

One intergovernmental agreement worth checking out is the Energy Charter Treaty (www.encharter.org). The ECT seeks to regulate investment and supply issues in the field of energy, with a nod to environmental concerns, especially via efforts to improve “efficiency”. It currently has 52 signatories (EC + 51), and entered into force in 1998. A review was conducted in 2004.

As the ECT Secretary General, André Mernier, noted in a recent speech (Nov 2007):

“With increasing reliance upon internationally traded energy, the rules and disciplines that apply to energy trade are of great strategic significance. Considerations of security of supply/demand and need of investment require predictability and transparency that could be achieved most effectively through a multilateral legal framework. At the same time energy markets and trade are constantly evolving, so it is a real challenge to negotiate multilateral rules for trade in energy.”

As indicated in this speech, the ECT has a working relationship with another group, a London-based “NGO” by the name of the World Energy Council. The WEC has member committees in 94 countries of the world. The mandate of WEC is 'To promote the sustainable supply and use of energy for the greatest benefit of all people'. They have conducted a regular “Survey of Energy Resources” since 1934, which they claim is “the prime global compilation of energy resources and reserves… Other compilers of energy statistics, such as the United Nations and the International Energy Agency, rely on this WEC data.”

We’ll be looking into this further… but my daughter is due to wake up any second…

Peak oil & POLI 486

So, is it or isn't it the peak? Is peak oil "real"?

There are no doubt many who deny that this non-renewable resource will ever run out, and they're no doubt correct. The peak doesn't mean we run out. It means that "supply constraints" cannot be overcome, and that supply will decline. The price of oil will continue to rise, except to the extent that demand pressures are reduced. That may look like a break in prices. in reality it's economic slowdown, for which "supply constraints" must be held responsible (in part, at least).

I get the sense that many class members are reluctant to understand this phenomenon as significant. Of course, peak oil is not quite mainstream. But just the other day the European Union Energy Commissioner, Andris Piebalgs, used the phrase in looking forward to future supply constraints. According to this EurActive article,

"Piebalgs referred to varying predictions about when the oil production peak will be reached, with some experts saying it will be in 20 years and others arguing that the world is already at peak production.

Highlighting the potential gravity of the problem, Piebalgs noted that the oil crisis of the 1970s presented a discrepancy between oil supply and demand of only 5%, but that in a post-peak oil scenario, the gap between supply capacity and demand could widen by 4% annually, leading to a 20% gap within five years."

As this course (POLI 486J) will examine, the uncertainty as to the impacts of such a decline, and the energy demands to which it will give rise, may well be interpreted as a "security" problem. Just what does that mean? Whose security is at stake, and whose will be defended? How does energy security relate to climate security, and climate change? How does it relate to food security, and survival for the world's poor, especially? My research interest in biofuels is in this sensee a very personal interest too, given the tremendous threat that biofuels pose to global food security, and given the power I have to take food from others' mouths and fuel my car with it. This may not be a new development in the global political economy, of course, but perhaps it has never been so clear how the rich world's "middle class" demands the very stuff of life for so many others.

Introductions

For the past 18 months or so, I have been following the news on peak oil, mostly via The Oil Drum and its fantastic contributions are a real education on the present and future state of energy, humanity, and a few other gems.

This blog is an effort to collect my thoughts, and to maintain a record of the trends as they evolve. It may serve as a template for a book, though for now it's more like a notebook. It will also serve as a supplement to a couple of courses I am currently teaching at Concordia University in Montreal: POLI 394, Globalization and Sustainable Development, and POLI 486J, Energy, Power, Security. I look forward to comments from members of these courses, and from outsiders who may stumble upon these notes.