Natural Gas and Oil Outlook - How Serious is the Situation? Part 1
Dennis Moran, Energy Pulse
In the first draft of this paper several months ago, the title was "Is There a Problem." The events of the last month have answered that question with a resounding YES. We now are experiencing a taste of what the future holds.
The problems have been building for quite some time and Katrina has triggered the first in a series of crises. Nevertheless, there still are many people in this county who think the natural gas (NG) and oil problems are only temporary.
They argue that high prices will trigger demand reductions and technological innovations that will bring prices back down to “normal” levels within a few years. However, the optimistic analyses I have seen typically exclude or ignore key considerations. When you consider all of the relevant supply-side and demand-side factors, it is not possible to conclude that these problems are temporary.
The latest Energy Outlook published by the US DOE predicts that oil and gas consumption will increase steadily until at least 2025. This forecast assumes that US producers and foreign suppliers will provide a steadily increasing flow of oil and gas. The data on the following pages shows that it is extremely doubtful that they can or would do so. We are far more likely to see flat or declining supply. If demand keeps growing and we do not come up with alternative energy sources, we will see shortages and turmoil that exceeds Katrina’s aftermath.
...We have begun a forced transition from a period of adequate energy supply and low prices to an era of persistent shortages... My forecast is that the transition will be characterized by a series of “boom / bust” cycles. Periods of tight supply will lead to shortages and high prices which trigger economic downturns. Lower demand during the downturns will lead to periods of adequate supplies and (relatively) low prices.
... On the NG side, we should see the first significant shortages when the period of exceptionally mild weather that began in early 2003 ends – the hot weather of this summer may signal the end of this period. North American NG production has been declining for the last few years in spite of a massive increase in drilling. Hence, periods of “adequate supply” should become increasingly shorter over the next few decades unless we experience a major protracted economic downturn. Aggressive action to locate new sources, improve energy efficiency and produce alternate fuel supplies could stretch out the “adequate supply” periods and the transition period. However, at some point in the relatively near future we will enter a period of permanent NG shortages.
Our NG problems are dominated by North American supply and demand issues, but oil markets are affected by events throughout the world.
(21 September 2005)
Some EB readers have complained at the lack of coverage of natural gas, which they see as even more critical than oil. Unfortunately, NG is not mentioned in the press as frequently as oil. Perhaps this article will encourage more coverage. See the original for figures and graphs.
Natural Gas and Oil Outlook - How Serious are the Problems? Part 2
Dennis Moran, EnergyPulse
Part 1 of this assessment painted a fairly bleak picture of the future that we can expect if we do not start taking aggressive action to reduce our dependence on oil and natural gas. Part 2 looks at the actions that can and should be taken immediately and the main barriers that must be overcome. In addition, part 2 provides a discussion of why I feel this assessment is more reasonable than the more optimistic forecasts you have seen.
(22 September 2005)
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