The IEA and Playing My Part: Is The Template For Our Energy Future?

The leaders of the West and their accomplices in the dinosaur media have spent endless energy since late February trying to convince us that there is only one side to the Russian actions in Ukraine and that, no matter how much it costs each of us, we must do everything in our power to punish Vladimir Putin.  This, in particular, will impact Europeans as the European Union nations are heavily reliant on Russia's vast reserves of hydrocarbons which are critical to driving Europe's economy.  As I published here, one non-governmental organization, RePlanet, has given Europeans one template for weaning themselves from Russia's hydrocarbon exports.  Not to be outdone, the International Energy Agency has weighed in with its own set of recommendations under the guise of "Playing my part" which we will look at in this posting.

 

The recommendations are a result of collaboration between the European Union and the International Energy Agency (IEA), a non-governmental agency that was founded in 1974 with the original goal of securing oil supplies during the OPEC crises.  The IEA is made of of 31 member nations which must meet the following criteria along with being a member of the OECD:

 

1.) Crude oil and/or product reserves equivalent to 90 days of the previous year’s net imports, to which the government has immediate access (even if it does not own them directly) and could be used to address disruptions to global oil supply;

2.) A demand restraint programme to reduce national oil consumption by up to 10%;

3.) Legislation and organisation to operate the Co-ordinated Emergency Response Measures (CERM) on a national basis; 

4.) Legislation and measures to ensure that all oil companies under its jurisdiction report information upon request;

5.) Measures in place to ensure the capability of contributing its share of an IEA collective action. An IEA collective action would be initiated in response to a significant global oil supply disruption and would involve IEA Member Countries making additional volumes of crude and/or product available to the global market (either through increasing supply or reducing demand), with each country’s share based on national consumption as part of the IEA total oil consumption.

Here is a list of the IEA's current membership:

 

 

Not surprisingly, the IEA has become "woke" to the concept of global climate change and its mandate has evolved to include an "all-fuels, all-technology" approach which includes renewables and clean energy technologies along with a greater focus on clean energy technology including energy efficiency. 

 

The "Playing my part" report:

...was undertaken with the following agenda in mind:

 

"People across the European Union want to take action to help Ukraine following Russia’s invasion. Many are also experiencing higher energy bills because of the energy crisis exacerbated by the war. Using less energy is a concrete way for Europeans to reduce their bills, cut reliance on Russian fossil fuels, demonstrate solidarity with the Ukrainian people, and support climate action."

 

After all, it's all about punishing bad bad Russia and supporting good good Ukraine, isn't it?

In their report, the IEA and European Commission include these nine recommendations for "playing your part":

 

1.) Turn down your heating and use less air-conditioning: the average heating temperature across the EU is 22 degrees Celsius.  The report recommends that people turn their heat down to 19 or 20 degrees Celsius and set their air conditioners 1 degree warmer.  Lowering the heating temperature by 1 degree Celsius could save 7 percent of energy used for heating and setting an air conditioner 1 degree warmer could reduce the amount of electricity consumed by almost 10 percent. The report recommends the use of smart controls and digital thermostats to allow households to control their heating and cooling.

 

2.) Adjust your boiler's temperature: resetting a boiler's default temperature can save up to 8 percent of the energy used to heat rooms and water.

 

3.) Work from home: since counting accounts for one-quarter of the oil used by cars in the EU and that the average one-way car commute is 15 kilometres and that more than one-third of jobs in the EU could be done from home, teleworking from home three days a week could reduce a household's fuel bill by around EUR 35 per month even when including the increased energy use at home.

 

4.) Use your car more economically: most car trips in the EU are made with a single occupant.  By pooling car journeys and setting the vehicle's air conditioning 3 degrees Celsius warmer, a household could save around EUR 100 per month.

 

5.) Reduce highway speeds: by reducing highway speeds by 10 kilometres per hour, households could cut their household fuel bill by EUR 60 per year.

 

6.) Leave your car at home on Sundays in large cities: the report recommends that cities mandate car-free Sundays, a practice that has already been adopted by Brussels, Edinburgh, Milan and Paris which could save a household EUR 100 per year.

 

7.) Walk or bike short journeys: On average, roughly one-third of car journeys in the EU are less than 3 kilometres.  By leaving your car at home and cycling or walking, households could save EUR 55 per household.

 

8.) Use public transit: while there is often not much spare capacity on public transit during peak travel hours, the report recommends that companies invoke a flexible working hours arrangement so that the spare capacity is reduced during normal off-peak hours.  As well, public authorities can promote the use of public transit by reducing fares on a temporary basis.

 

9.) Skip the plane, take the train: for distances under 1000 kilometres, high speed trains are an option.  The report recommends that employers encourage their employees to use trains or even virtual meetings as an alternative to travelling by airplane.  Based on Europe's current high-speed train infrastructure, the authors note that just under 5 percent of airplane journeys in the EU could be done by train.

  

In closing, here is a graphic summarizing the nine recommendations that will push Vladimir Putin right out of the Kremlin and Ukraine:

 

Isn't it interesting that the International Energy Agency and the European Commission are using a three-pronged approach to "playing my part"; environmental, economic and as an added benefit, punishing Putin's Russia for its military excursion into Ukraine, actions that are actually quite similar to what Europe, particularly the United Kingdom, and the United States have done in other nations over the past few decades?

 

Given the plethora of smart devices most particularly thermostats, how long will it be before governments take it upon themselves to use this technology to set our thermostats for us?  As well, since many new vehicles, particularly EVs, are connected to the internet, how long will it be before the elected class takes it upon themselves to limit our ability to drive where and when we wish, forcing us to adopt "carless Sundays" or whatever day or days they deem necessary?  I believe that it is entirely possible that governments could use the recommendations to cut energy consumption from Russia as a template for future climate change-related energy reductions.  One thing that you can assure yourself of is, that given their behaviours while the rest of the serf class was under pandemic lockdowns, the ruling class will be living in their well-heated/well air conditioned mansions, flying and driving wherever they please and whenever they please.

 

And, I'm also betting that Europe's strategy of completely weaning itself from Russia's hydrocarbons will just present other major economies (i.e. China, India etcetera) the opportunity of a lifetime to ensure their own supply of imported energy.

The International Energy Agency and the Blueprint for our Zero Net Emissions Future

While oil prices have moderated somewhat, a recent press release from the International Energy Agency or IEA provides us with a potential roadmap for our zero net emissions future given the so-called climate emergency that is likely to be used as the next excuse to trample what little remains of our freedom.

 

As background, the IEA was founded in 1974 around the time of the world's first oil crisis with the mission of securing energy supplies, particularly oil.  The IEA's current mission is to shape a secure and sustainable energy future for all.  Its founding members are as follows:

 

Austria, Belgium, Canada, Denmark, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, Norway (under a special Agreement), Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States. 

 

The founding membership was followed by Greece (1976), New Zealand (1977), Australia (1979), Portugal (1981), Finland (1992), France (1992), Hungary (1997), Czech Republic (2001), Republic of Korea (2002), Slovak Republic (2007), Poland (2008), Estonia (2014), and Mexico (2018), bringing the total membership to 31 nations.

 

Since 2015, the IEA has opened its membership to developing economies.  As such, there are now also association members which include, Brazil, China, India, Indonesia, Morocco, Singapore, South Africa and Thailand.

 

In addition to being a member of the OECD (i.e. the world's advanced economies), to be a member of the IEA, one must meet the following criteria:

 

1.) Crude oil and/or product reserves equivalent to 90 days of the previous year’s net imports, to which the government has immediate access (even if it does not own them directly) and could be used to address disruptions to global oil supply;

2.) A demand restraint programme to reduce national oil consumption by up to 10%; Legislation and organisation to operate the Co-ordinated Emergency Response Measures (CERM) on a national basis; 

3.) Legislation and measures to ensure that all oil companies under its jurisdiction report information upon request;

4.) Measures in place to ensure the capability of contributing its share of an IEA collective action. An IEA collective action would be initiated in response to a significant global oil supply disruption and would involve IEA Member Countries making additional volumes of crude and/or product available to the global market (either through increasing supply or reducing demand), with each country’s share based on national consumption as part of the IEA total oil consumption.

The IEA's current mission is to shape a secure and sustainable energy future for all.

 

With that background, let's go back to the recent press release dated March 18, 2022, entitled "Emergency measures can quickly cut global oil demand by 2.7 million barrels a day, reducing the risk of a damaging supply crunch":

In this press release, the IEA announced that it has provided the world with a new 10-point plan to cut oil demand by 2.7 million BOPD within four months, a move that would offset the loss of oil supplied to the market by Russia.

 

Here are the ten key actions and the impact to the oil markets:

 

1.) Reduce speed limits on highways by at least 10 km/h 

 

Impact: Saves around 290 kb/d of oil use from cars, and an additional 140 kb/d from trucks

 

2.) Work from home up to three days a week where possible 

 

Impact: One day a week saves around 170 kb/d; three days saves around 500 kb/d

 

3.) Car-free Sundays in cities 

 

Impact: Every Sunday saves around 380 kb/d; one Sunday a month saves 95 kb/d

 

4.) Make the use of public transport cheaper and incentivise micromobility, walking and cycling 

 

Impact: Saves around 330 kb/d

 

5.) Alternate private car access to roads in large cities 

 

Impact: Saves around 210 kb/d

 

6.) Increase car sharing and adopt practices to reduce fuel use 

 

Impact: Saves around 470 kb/d

 

7.) Promote efficient driving for freight trucks and delivery of goods 

 

Impact: Saves around 320 kb/d

 

8.) Using high-speed and night trains instead of planes where possible 

 

Impact: Saves around 40 kb/d

 

9.) Avoid business air travel where alternative options exist 

 

Impact: Saves around 260 kb/d

 

10.) Reinforce the adoption of electric and more efficient vehicles 

 

Impact: Saves around 100 kb/d

Some of these suggestions could easily have been taken from the climate change proponents playbook and could well provide a template for government actions when it comes to clamping down on carbon emissions.  The suggestions involving working from home three days per week, car-free Sundays (or any other day or or any number of days for that matter) and alternate private car access to the road infrastructure in large cities all have an odour of totalitarianism should they become mandatory.   As well, the suggestion that car sharing should be increased along with the potential all-encompassing "adopt(ing) practices to reduce fuel use" could, at some point in the future, provide the ruling class with just the ammunition it needs to reduce vehicle ownership which plays right into the "you don't own anything but are happy" narrative.  It is also interesting to see that avoiding business air travel when alternative options exist is recommended particularly given that the global ruling class (oligarchs and politicians included) seem to find it necessary to have face-to-face meetings with their peers while the rest of the sweaty masses deal with Zoom and other virtual meeting technology.  

 

Given that Western governments that have used the pandemic as an excuse to impose totalitarian restrictions on their citizenry that we could not have imagined being a reality two short years ago, in my mind, it is not a stretch to think that the IEA's plan for reducing oil consumption in light of the Ukraine - Russia conflict could form at least part of the blueprint for our so-called "zero net emissions" future.  And, again I say, today's conspiracy theory is tomorrow's reality.

The Future of Oil - 2010 to 2035

Now that we've seen West Texas Intermediate prices flirting with the $100 a barrel mark yet again and OPEC maintaining its production level at 30 million BOPD, I thought that it was time to take a look at the latest World Energy Outlook (2011) from the International Energy Agency (IEA) and see what they predict for the world's energy markets, focussing on oil, for the next 25 years.

First, let's look at the 3 year chart for West Texas Intermediate noting the steady rise in price from the lows of late 2008:

Now, let's look at the 3 year chart for Brent once again noting the dramatic rise in price from the lows of late 2008:

The IEA opens by noting that energy demand is expected to rise by one-third between 2010 and 2035 due to population growth which is estimated at 1.7 billion people and average annual economic growth which is estimated at what appears to be a rather robust 3.5 percent.  While slowing recent economic activity may have an impact on energy consumption over the coming years, over the 25 year period, it makes only a marginal impact on consumption growth.  Here is a graph showing the increase in demand for various forms of energy over the next 25 years (in blue):

Notice that both natural gas and renewable forms of energy fulfill the largest portion of the increased demand for energy.  The impact of renewables results in an overall drop in demand for fossil fuels  from 81 percent of all energy used in 2010 to 75 percent in 2035.

Population and economic growth is uneven throughout the world with non-OECD nations comprising 90 percent of growth and 70 percent of growth in economic output.  As a result, in the next 25 years, non-OECD nations account for 90 percent of the increase in energy demand.  Two nations, China and India , account for 50 percent of the growth in energy demand as shown on this graph:

By 2035, China consolidates its position as the world's largest energy consumer, consuming 70 percent more energy than the United States despite the fact that its per capita consumption is less than half the level of the United States.  Growth in energy demand for India is even faster than that of China as more and more of its rural citizens strive to reach the middle class and expect to share in the benefits.

Now, let's focus on oil.  By 2020, China is projected to take over first place from the United States as the world's largest oil importer and by 2035, it is anticipated that China will import over 12 million BOPD.  By 2035, 80 percent of the oil consumed in non-OECD Asia is sourced from imports, up from just over 50 percent in 2010.  This is largely due to natural declines in domestic Asian production.   By 2015, even the EU nation states will import more oil than the United States, largely because of rising U.S. oil output from tight formations (think fracking) and improved efficiency.  Here is a graph showing the changes in oil imports for the next 25 years:

World oil demand is projected to rise from 89 million BOPD in 2010 to 99 million BOPD in 2035 despite improvements in fuel economy technology.  While alternative fuels (i.e. electricity) are starting to appear in the transportation sector, it could take decades before new technology significantly impacts the use of oil as a transportation fuel.  Here is an interesting graph showing the projected changes in the vehicle purchases by nation over the next 25 years: 

The world's total vehicle fleet is projected to double in size to 1.7 billion vehicles in 2035 with most new cars sold in non-OECD nations by 2020.  Notice the increased market penetration of vehicles in both China and India.  As a result, non-OECD nations will become increasingly important to the oil demand scenario.

On the supply side of the oil ledger, conventional crude production is expected to remain constant before declining slightly to 68 million BOPD by 2035.  Most oil will be sourced from the Middle East and North Africa (MENA), with the area accounting for over 90 percent of the required growth in output needed to maintain supply - demand balance.   The IEA estimates that, to develop the productive capacity of the MENA region, an annual investment of $100 billion will be required.   To compensate for production declines over the next 25 years, 47 million BOPD of gross production additions are needed; to put this into context, this is twice the volume of oil currently produced by all Middle East OPEC nations!  This will require an investment of $10 trillion over the next 25 years.  As a firm believer in Peak Oil, I would suggest that this reserve and production replacement scenario is highly improbable.  With my background as a geoscientist in the oil industry, I find this graph from BP's Statistical Review of World Energy most compelling:

Note the non-descript grey line in the middle of the graph.  That's the world's reserves-to-production (R/P) ratio.  Note that since 1985, the R/P ratio has not increased despite the trillions of dollars spent on oil exploration and exploitation and the new technologies that have allowed production from ultra-deep water and ultra-tight formations.  The world is on an oil treadmill with resource discovery staying just level with oil consumption.  If not for the one-off reserve additions in Latin America, the situation would be far worse.  As I stated above, the odds of adding an additional 47 million BOPD of new production to compensate for natural declines are rather low.

The IEA suggests that part of the increase in oil production required could be sourced from natural gas liquids (18 million BOPD by 2035) and 10 million BOPD from unconventional sources.  As shown in this graph, the largest oil production increases are sourced from Iraq, Saudi Arabia, Brazil, Kazakhstan and Canada:

Additionally, 4 million BOPD of biofuels are required to balance the ledger, a scenario that will require massive subsidies by governments who will, at that point in time, already be handicapped by unserviceable levels of sovereign debt making that part of the scenario less likely to occur.

As I have noted in previous postings, it is demand from the non-OECD Asian nations that will drive the energy markets in the coming decades, particularly the world's oil market.  According to the United Nations, 1.3 billion people in the world do not have electricity and 2.7 billion people still rely on biomass for cooking.  As these people strive to reach the middle class over the coming years, their energy consumption will, quite naturally, rise in lockstep with their improved lives.  This increasing demand will occur at the same time as the world's conventional sources of oil dwindle.  My suspicion is that the looming scarcity of the one resource that led to the rapid industrialization of the world in the first half of the 20th century will also lead to the world's next major geo-political conflict, particularly as prices for fossil fuels rise to the point where we are all very uncomfortable.