Shell's Chief Strategist: Two Scenarios in Oil's Future
 

Shell's Chief Strategist: Two Scenarios in Oil's Future

NPR Morning Edition, April 22, 2008 •

As oil prices hit $117 a barrel this month, a forecast from Shell Oil outlines two very different possibilities for the future of the world's energy supply. Looking out to the year 2050, Shell strategist Jeremy Bentham says demand will go up, while oil supplies will be harder to find.
"We anticipate that you'll begin to see a plateauing of easily accessible conventional oil and gas around about the 2015, 2020 type of period," Bentham tells Steve Inskeep.
Bentham outlines two outcomes — one a "scramble" and the other a "blueprint" scenario — for addressing energy needs.
In the scramble scenario, he says, "a focus on supply security drives a lot of decision-making." For example, China is worried about its future supply of oil, so it decides that it needs to be friendly with Iran. Or the U.S., worried about its supply of oil, holds intensive talks with Saudi Arabia.
"That can kick off a dynamic where the tensions are perceived to be a fight between nations and hence a scramble for supply. The demand side is postponed, in terms of being managed, in that scramble outlook," Bentham says.
So, a fear of shortage of supply builds up, and the steps to manage the whole energy system holistically aren't taken, Bentham says. Instead of considering conservation or alternatives, people just grab for oil and other forms of energy.
The "blueprint" scenario, on the other hand, recognizes that forces can combine to affect change. "You see emerging coalitions coming together at the state level but also cross-border" to find solutions, Bentham says.
He points to climate-related legislation in California as an example.
"A set of interests were recognized among technology entrepreneurs and farmers and shrewd politicians which led, in this country in 2006, to the climate-related legislation in California," he says.
That legislation influenced thinking in other states, which in turn influenced thinking at the federal level. "So you get this spreading awareness and spreading regulatory activity; you get a set of actors who influence the national agendas," Bentham says, and a patchwork of standards and regulations begins to emerge.
"You don't get global agreements," Bentham says, "but you get a critical mass of sectors and countries having, for instance, some kind of carbon dioxide pricing in the blueprint scenario." And that approach would grow over time as people recognize the benefits, because it promotes energy efficiency and new technology developments, he says.
Shell has a preference for blueprint-type outcomes that address demand, supply and environmental issues together, Bentham says, because "it's better for society at large, but also it's better for business and investment."

I’ve had a number of conversations with a client who is the 1# oil trader in US. He has gone into great detail correlating current conflicts and power positioning of Russia, China, and the US. His opinion is that a sensible solution will only evolve when each of the major players has secured a tenable position in which they have a sense of security in the near term. And that the current positioning of each is the initial actions in securing that goal of near term security from which each can then negotiate and partner. Asked if he saw a solution, his answered that it would require the nation (US) to sacrifice on the level of the depression; while simultaneously developing a new Government agency like NASA for alternative fuels, engines etc., and expanding explorations for oil in the national interest, to the determent of the environment. He is not optimistic and foresees a continual era of conflict until the US makes a conceptive effort to become energy independent, At that point, the other powers will realize the intent and their security over energy issues will abate.

Thank you for this post, Sir!

It corresponds to a remarkable degree with Hirsch's study for DOE, Simmons book (Twilight in the Desert).

This line, in particular, caught my eye: Asked if he saw a solution, his answered that it would require the nation (US) to sacrifice on the level of the depression; while simultaneously developing a new Government agency like NASA for alternative fuels, engines etc., and expanding explorations for oil in the national interest, to the determent of the environment.

Such a solution would not be politically viable...

...gov't knows best...

A blueprint for demand and supply...
I think there's a term for that...

Maybe they can call it "The Newer Deal".


NPR promoting such a thing?!?! I'm shocked! :rolleyes:

One thing that's always tightened my colon is that old saying about putting a man on the Moon. JFK said we'd do it by the end of the decade and we did! Now how come the US can't do something like that, or a Manhatten Project-like deal, and come up with something to replace oil???

What did Bruce Willis say in Armageddon? "You're NASA for crissakes! You should have a room of guys, thinking shit up, and a room of guys backing them up!" I don't think that's too much to ask for.

Here's an idea: for at least 10 years, prohibit any taxation on the production, sale, transportation, use, etc. of methanol.

For at least 10 years, prohibit any taxation (of any form) on any machine, generator, vehicle, etc. which uses (85% or greater) methanol as its fuel.

It is important to exclude ethanol from this idea because of the potential effects on food supply.


Do this and watch how quickly the private sector solves the problem.

Great post Penn!

A lot of moving parts here! Oil companies are interested in profits and have been intra-national for decades; they are not on our side. I lived in Germany from 1979- 1981, fuel there was $3.00-$4.00/ gal then. We in the US are now seeing the real cost of fuel. Add political agendas and the problem really loses any center of gravity. It would seem the "NASA like" focus the best chance we will ever have. Better yet a global "NASA" approach.

RF 1

JESUS!
 

Why in the hell would you operate a company in the RED? if it was not there to produce a PROFIT!:confused:

Stay safe.

Guy,

You are right. Too long in the red = out of business.

A few thoughts
 

It would seem that nations and national interests of host based multi-national firms would engage the basic’s principals of microeconomics for the welfare of its host citizenry. That is not the case, nor will it ever be. A multi-national is loyal to quarterly and yearend reports only. Its obligation is to its shareholders; and not the national interest of its host nation. That is not to say Exxon is not an American company, it is, but its decisions, as a firm, and it’s interactions with national interest to form policy are based on what is best for the company, not for the consumer of the host nation.

It does not care if per/bbl price is $117 or $52 the barrel. Its concern is point of extraction to point of delivery, period! It is understood from the perspective of the market. The firm factors the prices of goods and services and the cost production and that is what you are supposedly paying for; but you are not.

What you are paying for, is the belief that Exxon, delivers its product in a fair market environment, and that Exxon, has you in its frame of reference, when it extracted oil from the ground at $6.87per/55gal/bbl and processed it for another $2.40 per/bbl. and that the company was under extreme duress to accomplish this task; as a result, you are paying $4.00 a gallon at the pump. Look at the figures Exxon posted on production. Look at its ROI: 220 gals @ $4 per/gal = $880bbl gross before COS.

Now consider one other part of the equation. Refiner capacity is down; a documented fact, refineries were shutdown. Why were refiners closed? Is there a shortage, or have the companies become more technologically efficient? Are there gas lines? Is supply controllable? Do producer nation control output? Is the board of OPEC a multi-national? What is in the interest of producer nations whose only export is oil? What drives this market? Are you paying for the belief that supply is on the decline based on the information from the parties that control and market this resource? What is in the interest of regional powers to control this resource, and in that regard, where is the fault line that a world power would risk a true war to preserve its national interest. And conversely, where is the line in the sand where a producing nation would risk their annihilation looking into the abyss of breaching that fault line.

Gas is cheap at $4.00 a gallon.

Consider this nine year old article:

Pravda 1/29/1999

The US administration plans to launch an extensive economic intrusion in the Arctic from Alaska
The Russian government urgently needs to determine the basis of its state policy in the Arctic region. To make matters worse, politicians will probably have to face a serious problem from abroad too. It has recently transpired that the US administration plans to launch an extensive invasion in the Arctic region in order to oust potential partners from the oil-rich territory. The USA particularly plans to build airbases in Alaska, while US oil giants intend to develop the Arctic shelf. To mask the intrusion and make it look like a peaceful initiative, the USA would be ready to render humanitarian assistance to Russia to improve the living standard of “the impoverished northern nations of Russia.” In addition, Washington says that it will protect the whole world from the huge hole in the ozone layer of the Earth's atmosphere above the Arctic territory. This territory, however, belongs to Russia, but it seems that the fact does not bother the US administration.

One may thus infer that “American partners” claim to obtain the key role in the development and exploitation of the Russian territory. The ice-bound north is just a start. Russia urgently needs to take measures to move the Arctic economy forward and create investment-attracting conditions in the region. Otherwise, the people living in the Far North of the country will have a chance to see Chinese ice-breakers traveling by.

It is obvious that the development of USA's new objective in the Arctic region will be conducted within the scope of the nation's ambition to dominate the world. This intention is officially registered in the US National Security Strategy. The document entitles Washington to possess all necessary resources to influence the situation in all key regions of the globe. The Arctic has become one of such regions.

Since1999, Vladimir Putin has rectified that. A quick glance of the paper written by Dr. Olcott of the James Baker Institute for Public Policy at Rice University should clear that up. Title: “Valdimir Putin and the Geopolitics of oil”.
.http://www.carnegieendowment.org/fil...t_english1.pdf

Anyone under 50 will not get this.

I do not care that much what gas costs, as long as I can get it.

Anyone else here who sat in line in 1973 and 74 waiting 45 minutes to buy 5 or 10 gallons at the time, and driving around with less than 1/4 of a tank and seeing station after station with "No Gas" signs out front knows what I mean.

When the government started tinkering with price controls over domestic production to prevent the massive oil company profits, they quit pumping it, and there was a serious lack of oil and gas.

Before you ask our idiotic elected representatives to solve this problem (who seem to think that what a spoiled, overpaid bunch of athletes put into their bodies is more important than the global threats that we are facing) let me tell you that they will make it much worse before it gets better.

The refineries were shut down or cutting back because the price spread between oil prices and refined products (mainly gasoline) was too low, or in some cases, inverted, so they cut back to run the price up to a point where they could make a profit.

BLUF: If the oil companies can't make a profit drilling and pumping oil, they will stop. If they cannot make a profit refining oil or selling gasoline, they will stop. You can't really make them start again, only the market can. Tight supply, increased demand, and speculators have driven prices up, and the companies are currently making a good profit. Sometimes, they lose money. It hurts a little to pay more, but at least we have a good supply. If we do not make some changes, that may not always be the case.

TR

Broadsword, In part, you are correct, but what I was referring to was the coalescence of oil and state policy. Not the effect of that involvement on the individual consumer. The Pravda article, written in 1999, set the stage publicly of what was Russia’s intent. It announced that the state needed to secure itself and its mineral resources. In that same year, Putin publishes his dissertation. That dissertation is now the current policy of Russia.
If you read the paper I linked: http://www.carnegieendowment.org/fil...t_english1.pdf you will see what he accomplished is quite extraordinary. He or his base realized that the multi-national Russia oil companies were not interested in the welfare of state, but rather themselves. The paper is insight in understanding our current situation, policy influence, and the resulting conflict.

Another dead on target post by TR.