Three Studies That Made The Difference

(Stabroek News, 8.Aug.2021) — To recap, this long-running series of Sunday Stabroek columns focusing on Guyana’s emergent oil and gas sector commenced just four months short of five years ago; on September 4, 2016!

Introduction

To recap, this long-running series of Sunday Stabroek columns focusing on Guyana’s emergent oil and gas sector commenced just four months short of five years ago; on September 4, 2016! The first two columns signaled clearly I intended “to situate the coming time of Guyana’s oil and gas production and exportation to world energy markets from both the demand and supply side perspectives” respectively. Over the years that have elapsed, three publications  above all that I have read have, collectively, provided me with enormous insight and rich understanding of the present-day rapid unfolding global energy dynamic.

 As might have been anticipated, these publications have also provided insight into other dimensions of today’s epistemic crisis; the topic I have focused on in the immediate past several columns. Such observances will be revealed in the course of my coming review of these publications.

Given my commentary on Guyana’s budding epistemic crisis, I add upfront that I shall be specifically proposing the identified publications also attest to my previously referenced global explosion of noise and nonsense in the global energy sector. However, this time, the relevant observations are based on confessions made in 2020 by a leading exponent of fake news and dis-information who has bravely admitted that he had perpetrated, while himself an acknowledged leading  environmentalist in the global fight against the climate disaster.

The three publications  were published in the 18-month period, January, 2019 to June, 2020. In the random order in which I shall address them, these studies are: 1) the United States Energy Information Administration, EIA, International Energy Outlook, 2019, with projections to 2050, September 2019; 2) Terry Etam, The End of Fossil Fuel Insanity: Clearing the Air before Cleaning the Air, January, 2019; and 3) Michael Shellenberger, Apocalypse Never: Why Environmental Alarmism Hurts Us All, June, 2020.

The EIA report is a solid professional work that provides a well written and cogent exposition of longer- term trends in global energy markets. It has shaped my conviction that a transition to renewables leading global primary energy usage is likely to take place over the next three decades. Nonetheless, by 2050 petroleum liquids still remain a major contender. Etam’s book is an iconoclastic and disturbingly irreverent portrayal of the ABCs of town, city, and country redesign, which lies behind the nuts and bolts of any successful global transition away from fossil fuels and their accompanying greenhouse gas emissions, ghg. Shellenberger’s book is a heroic admission of promoting fake news and dis-information, while claiming loyalty to a science- based progressive environmentalism.

Starting this week with the EIA Report, I shall introduce these outstanding publications to readers. All three are written with accessibility to the average reader at the forefront of considerations.

The EIA 2019 global energy report

The EIA 2019 International Energy Outlook, with projections to 2050 report, although published by the Office of Energy Analysis of the United States Department of Energy, is offered as an “independent” publication. That is, it does not represent the official views of the United States Government, USG. This safeguards its editorial independence. The document contains a preamble which in the main summarizes its methodology. It examines in detail,  energy consumption historical trends by type and makes projections to 2050.

The basic  functional model which the report employs is its self-branded World Energy Production System+, WEPS+. This model has been commonly described in the energy literature as “a comprehensive energy forecasting and policy analysis tool used to  project energy supply, energy demand, and energy prices, by country or region, given assumptions about the state of various economies, international energy markets and energy policies”

The modelling is based on drawing conclusions from projections derived from the observed behaviour of a unique Reference Case. In this instance, what is being specifically observed is clearly not, what is likely to occur or be realized but what occurs to the unique Reference Case. Methodologically this is an important distinction since most projections seek to establish what is likely to be realized. The question which arises now is: What are the key features of the Reference Case?

Because the Reference Case is a baseline from which to measure the impact of certain assumptions several features stand out. First, global GDP growth to 2050. The model assumes a 3 percent long-term real growth rate. For comparative purposes high and low real GDP growth rates are also examined. The former is given as 3.7 percent; and the latter as 2.4 percent.

The second standout is the set of economic assumptions that undergird the GDP projections. One of these is global population growth. The WEPS+ model assumes an increase of 0.7% per annum. The third standout assumption refers to trends in the legal and regulatory environment. These are assumed to follow prevailing medium-term glide paths and do not entertain exogenous trend- disruptive developments like border changes arising from armed conflicts. The same holds for technological advances; no technological breakthroughs are assumed. But incremental adjustments permitted.

While next week’s column will focus on presenting the results of the EIA modelling of primary energy demand, the organization of the world by region, the assumed behaviour of crude oil prices and output also stand out in the Reference Case. The world is modelled on the basis of two major groupings, and 16 regions. The two major groupings are the Organization for Economic Cooperation and Development, OECD countries and non-OECD countries. The former includes Australia and New Zealand; Mexico and Chile; United States; South Korea; Canada; OECD Europe; and Japan. The non-OECD are India; Africa; Other Asia; China; Middle East; Other Americas; Other Europe and Eurasia; Brazil; and Russia.

Crude oil prices are modelled on the basis of North Sea Brent.  The Reference Case assumes a real crude oil price of US$100 per barrel in 2050, measured in 2018 prices. The high and low prices are modelled at US$185 and US$45, respectively. Finally, the model reveals an annual output increase from 80 million barrels in 2018 to 100 million in 2050.

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By Dr Clive Thomas