3E Intelligence

Shell’s CEO Jeroen van de Veer has a remarkable editorial in The Times today, pointing to three “hard truths” about the future of energy.

First of all, “global demand for energy is growing, but the reality of how fast hasn’t really sunk in”.

Secondly, “the growth rate of supplies of “easy oil”, conventional oil and natural gas that are relatively easy to extract, will struggle to keep up with accelerating demand. Just when energy demand is surging, many of the world’s conventional oilfields are going into decline”.

Third, “increased coal use will cause higher CO2 emissions, possibly to levels we deem unacceptable”.

Renewable energy “will not be the silver bullet that will soon solve all our problems”, says van der Veer. The use of solar and wind might grow up to 30% by 2050 but still 70% of our energy needs will be filled by fossil fuels.

So, in the end, van der Veer’s “silver bullet” is energy efficiency. “We should aim to become twice as efficient in our use of energy by the middle of the century”.

Comment: Shell is without any doubt one of the few big oil companies daring to face up to some of the “hard truths” of climate change/energy security, but it still seems to close its eyes to some others. First of all, as all good energy economists know, energy efficiency still faces a few major issues: the “energy efficiency gap” (the existence of market failures and barriers) and the “rebound effect”. For me, the jury is still out if voluntary energy efficiency measures which rely on the consumer will really have their effect.

Secondly, the Shell CEO is courageous in admitting that the world’s oil fields are going into decline, but then states that “the problem is not the availability of resources as such”, citing the International Energy Agency’s figures of “roughly 20 trillion barrels oil equivalent of oil and natural gas in place” remaining”. I wonder where and how Shell is going to get these numbers out of the ground 🙂

So, in the end, I guess it is time to face up to the “hardest truth”. The world has started its “energy descent” and will have to learn to live with it. And without any doubt the solution will have to revolve around the taboo of population control, a point van der Veer mentions “en passant” (“Energy use in 2050 may be twice as high as it is today, or higher still. The main causes are population growth, from six to more than nine billion people, and higher levels of prosperity”), but forgets to develop further.

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