Low-cost oil producers will start to question why there are rationing supplies and this will have “huge implications” for the oil market, said Spencer Dale, Group Chief Economist at BP.
Addressing the annual BP lecture at Alliance MBS, Dale – a former chief economist at the Bank of England – said in no other industry could you have a country such as Saudi Arabia, where it costs just $10 to produce a barrel of oil, operating in the same market as a country like Canada where it costs $30 to $40.
“There are 2.5 trillion technically recoverable barrels of oil, more than enough to meet world demand for oil until 2050 twice over. We are not going to run out of oil, so why are we rationing it? I can see low cost producers all starting to question why they are rationing oil, but the pace at which that will happen is unclear.”
Dale said this issue had major significance given the soaring demand for energy in coming years from emerging economies. “Energy is critical to the future prosperity of the world. Two billion people will be lifted from low incomes to middle incomes over the next 20 years and demand for energy will increase significantly. All that increased demand will come from emerging economies.”
He said the world faced a dual challenge – it needs more energy to meet this soaring demand but less carbon. “Solving this is the big challenge we all face working in the energy industry,” he added.
Dale said the determinants of oil supplies - when the fuel is not exhaustible - was one of three key questions in this context. The second was the extent to which LNG (Liquefied Natural Gas) would change global gas pricing, while the third was how quickly renewables would penetrate the energy system. “If we knew the answers to these three questions we would be well on the way to solving the energy challenge.”
He predicted that the next few years would witness enormous growth in the LNG market because of its ability to be transported very flexibly around the world and not be reliant on pipelines.
“LNG creates a globalised gas market like the globalised oil market of today. This has huge implications for energy transition and LNG can particularly help drive the transition from coal to gas in emerging economies with no access to pipelines.”
He said that because the US exported LNG most widely across the globe, US gas prices will act as a natural anchor for the market in the future. “We expect natural gas to be the fastest growing fossil fuel, with shale gas able to grow very rapidly too. The growth of LNG provides the means of getting that gas to market.”
In terms of how quickly renewables will penetrate the energy system, Dale said history teaches us that energy transitions take a very long time, largely due to the huge shift in resources and finance that is required.
He added: “Will renewables be any different? We expect renewable energy to grow quicker than any fuel in history, but by 2035 it will still only be about 10% of world energy needs, which means 90% still needs to come from somewhere else. However we see gas as a complement to renewable energy as it is a flexible, low carbon fuel.”
Alliance Manchester Business School and Bruntwood celebrate significant step in campus redevelopment
Wednesday, July 19, 2017
MANCHESTER, 19 JULY, 2017 – Luminaries and leadership figures from Alliance Manchester Business School, Bruntwood and partners gathered on site at the hugely improved campus last night to celebrate a significant step forward in its redevelopment.
Alliance Manchester Business School and The University of Birmingham award 1000th MSc in Healthcare Leadership on behalf of NHS Leadership Academy
Friday, July 14, 2017
1,000th Masters in Healthcare Leadership is awarded on its flagship Elizabeth Garrett Anderson (EGA) programme.
Monday, July 10, 2017
Alliance Manchester Business School has been awarded £9.7 million by HEFCE
Monday, July 3, 2017
Calls for private arbitration to avoid delays to transport projects
Monday, July 3, 2017
Alliance Manchester Business School has today been placed 30th in the world in the Financial Times’ Top MBAs for Entrepreneurship ranking.
Tuesday, June 27, 2017
Developing robust accounting metrics and management accounting systems will be crucial as companies adapt to today’s huge environmental and technological challenges.
Thursday, June 22, 2017
The challenges of running a business today were laid bare during our Vital Topics series this year as we touched on a number of key boardroom issues, Alliance MBS also hosted a number of other lectures through the year on subjects ranging from machine learning to inter-generational tensions.
Wednesday, June 14, 2017
By Jonatan Pinkse, Professor of Strategy, Innovation and Entrepreneurship, Alliance Manchester Business School
Wednesday, June 14, 2017
The full extent of social and economic inequalities across Greater Manchester – and between the city and the rest of the UK - have been laid bare in a major study.