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The New York Times: World's Energy Policy Is Not Sustainable: Monday 7 November 2005

Published: November 7, 2005
Filed at 9:18 a.m. ET

PARIS/LONDON (Reuters) - The world must change its energy habits or struggle with choking fumes, runaway oil demand and a growing dependence on the volatile Middle East for fuel, the International Energy Agency said on Monday.

Energy demand and greenhouse gas emissions will soar by more than 50 percent by 2030 if consumers keep burning oil unchecked, the IEA said in its World Energy Outlook. That would blow a hole in the Kyoto protocol aimed at cutting developed nations' emissions five percent below 1990 levels by 2008-12.

To keep pace with booming demand over the next 25 years, top producer Saudi Arabia and its neighbours would have to spend an annual $56 billion on rigs and refineries or oil prices will race higher, said the IEA, adviser to 26 industrialised nations.

``These projected trends have important implications and lead to a future that is not sustainable,'' said IEA Executive Director Claude Mandil. ``We must change these outcomes and get the planet onto a sustainable energy path.''

The message had added resonance coming from an agency whose members include the world's top polluter and oil user the United States, which quit Kyoto in 2001. The IEA was set up after the 1973-74 Arab oil embargo to oversee Western energy needs.

``This is a grim prognosis based on business as usual,'' said Klaus Toepfer, Executive Director of the U.N. Environment Programme.

``So it must be a clear signal that, in order to avoid such a disaster, we must deploy technologies and adopt economic measures that are already available and feasible.''

Under the IEA's reference scenario, a likely but undesirable outcome the agency said, Middle East and north African producers must double annual investment on oilfields to satisfy consumers' thirst for fuel. Failure to spend enough over the next 25 years could slap an extra $13 a barrel on the projected oil price.

``If investments do not come in a timely and sufficient manner, there will be higher oil prices, and global economic growth will suffer,'' said IEA Chief Economist Fatih Birol.

The IEA also outlined a deferred investment scenario, where producers delay spending -- inadvertently or deliberately -- and a world alternative policy scenario, where importing nations take action to cut demand and change the pattern of fuel use.

``Consuming countries have realised there has to be a policy response to these prices and that process has begun,'' IEA Deputy Executive Director William Ramsay said.

``We would be quite happy to see our reference scenario made irrelevant by good policy decisions.''

The combined emissions of countries that have signed up to Kyoto are well below half the world total. Apart from the United States, which accounts for about 25 percent of all emissions, the other big emitters outside Kyoto are China and India.

``The Kyoto protocol doesn't amount to much in terms of emissions reductions but at least it breaks the curve (of rising emissions) among countries that have accepted its targets,'' said Steve Sawyer, climate policy expert at Greenpeace.

``We have to work out the trick of how to get the United States and the rapidly industrialising developing countries to break the curve as well,'' he said.

China raised its targets for increasing its use of renewable energy on Monday but acknowledged that coal would remain its primary energy source for decades.


Core producers must pile cash into global refining to rid the energy system of bottlenecks that helped drive prices to a record high above $70 in late August, the IEA said. The United States has not built a refinery on its soil in three decades.

It was drastic spending cuts on oilfield expansions in the late 1980s and 1990s that have has left the world stretched for supplies as demand explodes in Asia and the United States.

The Paris-based agency says it is high time Middle East and north African producers ``reinvest with confidence.''

Saudi Arabia would have to shell out $174 billion on oil and gas projects through 2030 under the IEA's reference scenario.

For its part, Riyadh already has a $50 billion oil and gas expansion project in train.

Even if world governments got tough on tackling the environment and energy security, demand in 2030 would still soar by 37 percent and the Middle East and north Africa would be pumping much more oil than now.

``This will add to the vulnerability to a disruption and to the risk that those countries will seek to use their dominant market position to force up prices at some point in the future,'' said the IEA.

In the reference scenario, global dependence on Middle East fuel would rise as oil demand grows 1.4 percent per year -- from 79 million bpd in 2003 to 92 million bpd in 2010 and 115 million bpd in 2030. Developing countries would account for more than two-thirds of the increase in demand.

Asia looks especially vulnerable in the IEA's reference scenario -- with the region's reliance on Middle East oil and gas growing from 83 percent in 2004 to 90 percent in 2030.

North America would become the Middle East's biggest importer in 2030 when imports hit 11 million bpd, a quarter of the region's total exports of 39 million bpd.

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