Energy economics: BP’s projections for 2030 with chief economist

By Chelsea Wallis
Jun. 17, 2013 – Mining IQ

BHP Chief Economist Christof Rühl (Photo: supplied)

BHP Chief Economist Christof Rühl
(Photo: supplied)

There is no longer a dominant fuel. The old boys, coal, oil and gas, are converging in the race for a share of the world’s primary energy, according to BP’s energy outlook for 2030. And they aren’t the only ones contending anymore.

In an exclusive webinar with Mining IQ, BP’s Chief Economist, Christof Rühl, explains who will take on Old King Coal and Hydrocarbon Man in the next two decades of energy production.

“Over the period to 2030,” the outlook states, “the US becomes nearly self-sufficient in energy while China and India become increasingly import-dependent.” The role of North America in unconventional oil and gas is already taking shape as a major factor in meeting global demand increase through the end of this decade and into the next.

Leading the way for North American innovation is the power of competition and market forces driving efficiency, says Rühl. These themes are important “not only in unlocking new supplies such as unconventional oil and gas but also in improving energy efficiency and consequently limiting the growth of carbon emissions.”

Here and now
Growth can be attributed to North American’s natural resources: the oil sands in Canada and the Bakken shale basin in the US. But that’s not to say resources are sparse in other parts of the world: Venezuela, for example, Chinese shale and deep water reserves in the Gulf of Mexico. There is something different about North American reserves.

That difference is the role of government. Although the resources exist globally, technical innovation is not flourishing in strictly regulated countries the way it is in the US and Canada, where energy markets and companies have competed for investor money on an open and well developed market.

Rühl expects its share of the market to be big, and in the US it already is: “Assessing both global resources and ‘above ground’ factors, North America will continue to dominate production by 2030, even as other regions gradually adapt to develop their resources.”

He expects the US will cut imports by half in the next 6-7 years, two-thirds of which is in domestic production and the last third being a decrease in demand.

The same developed markets and competition for investment has benefited another sector of the industry as Rühl sees renewables making slow gains. Small and medium companies are developing and improving resources such as solar and wind, and bigger players are moving in to absorb them.

Although, renewables still have a gamut to run if they are to prove themselves in the market.

“The story of renewables can be compared to the story of nuclear power in the ‘70s and ‘80s,” says Rühl. “They run the danger of the glass ceiling if costs don’t come down.”

Europe cut nuclear subsidies and the market was no longer competitive because safety concerns made the highly subsidised product a major political talking point, and the price to produce nuclear energy never came down.

“However I think the market share for renewables will be better,” Rühl postures, “because they are better at reinventing themselves and creating increased efficiency because of competition.”

Full report available
Christof Rühl manages BP’s global economics team, providing input into the firm’s commercial decisions. He presented the BP Energy Outlook 2030 findings to Mining IQ members and suggested how those findings will affect the world economy. To find out the global implications of tight oil and shale gas trends, the full webinar with Christof Rühl is available here.

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