1 Energy Security Global Issues Seminar Series November 8 th 2006

2 Energy Security is…? –For rich countries…maintaining life styles, and continued growth –For poor countries…growth and development –For the poorest.. access to wood, electricity,… –For producers…market access

3 Most simply… Reliable energy supply at reasonable cost and acceptable environmental impacts…. … that will allow the world to grow in a sustainable and equitable way

4 Why concerns about energy security now? 1. High oil prices & processing constraints 2. Perception that future oil supply may be insufficient: –High and growing concentration in the Middle East OPEC countries –Strong growth from a booming China –Emerging India –Robust demand from the industrialized countries with easy substitution away from oil over 3. No easy successor to oil waiting in the wings

5 High Oil Prices (again)

6 Its more than Oil

7 Concentration of oil production

8 Concentration of future oil production

9 Potential for future demand growth (Source IEA) Developing Country Population: 6.4 billion Developed Country Population: 1.0 billion

10 Non-OECD demand grows three times faster than OECD demand IEA Global Demand by Region Business-as-usual scenario

11 What are the alternatives  Heavy oil/tar sands: potential but climate change impacts  Coal: super competitive (fastest growth in 2005) but climate change and local pollution  Gas: prices linked to oil and concentrated  Efficiency: lots of potential in developed countries but how to make it happen  Renewables: becoming more competitive but costs and other constraints (e.g. bio fuels, dams, wind) (e.g. bio fuels, dams, wind)

12 IEA Global Demand by Fuel Business-as-usual scenario In Reference Case, global energy demand will rise by 52% by Mtoe Oil Natural gas Coal Nuclear power Other renewables Hydro power

13 IEA Increases in Energy Demand Absolute Increase (Mtoe) % Increase Coal1,14244% Oil1,76147% Gas1,69876% Nuclear8012% Hydro14162% Biomass51045% Other RE % Total5,55052% 83% of additional demand to be met from fossil fuels

14 How important for WBG’s developing countries?  Short Term –Short term macro adjustment by oil consumers –“Windfalls” management by producers  Long term –Higher costs, if not avoided, are a significant “tax” on oil using poor countries –Volatility – impact on growth? –Implications for changing fuel cost competitiveness (& climate concerns) on:  Energy strategies and long term energy Investment choices  Other aspects of development

15 What Can be done to secure energy supplies  Everything is important – no silver bullet  Greater efficiency, conservation and renewable energy  Fossil fuels with environmental mitigation  Energy independence is a mirage  Interdependence is the only way –Open trade and investment –Cooperation  Use of markets and private sector to greatest extent

16 Final Question? A new era in terms of the world’s use of resources Versus: Market forces and ingenuity will sort it out