Several years ago Schlesinger co-chaired a Council on Foreign Relations study with John Deutch of the Massachusetts Institute of Technology on the geopolitical implications of America’s dependency on imported oil (Victor et al., 2006). That study articulated three key observations, which several other speakers at the summit reiterated. The first is that the rising consumption of oil (driven by rising incomes and population growth) in the face of limited supplies will continue to put upward pressure on prices. This development is a departure from the past, said Schlesinger, when bodies such as the Organization of Petroleum Exporting Countries were established to limit the abundance of supplies.
Current demand for energy services reflects both the large amount of energy being used in the industrialized countries and the increasing use of energy in the developing world (Chapter 3). Consumption of petroleum, natural gas, and coal in the United States, Europe, and industrialized Asian countries is large but relatively stable, Jeffery pointed out. But in rapidly developing countries such as China and India, energy consumption is growing dramatically. As recently as the early 1990s, China supplied its own energy resources. In less than two decades, China’s oil consumption and its gross domestic product have tripled. As a result, China now imports more than 3 million barrels of oil per day, and that number is growing rapidly.
Demand for energy is likely to increase even more in the years ahead (Figure 1.1). The world’s energy consumption could grow by more than 50 percent by 2030, with three-quarters of that increase coming from the developing world. By the end of the 21st century, energy use could more than double, although actual use will depend on prices, availability, new technologies, and many other factors.
Meeting a rising demand for energy will require significant investment, Jeffery pointed out. The International Energy Agency (IEA) estimates that $22 trillion in new investment will be needed to meet expected global demand in the next two decades (IEA, 2007).
Production and the discovery of new energy sources are not yielding sufficient fuels and electricity to keep pace with increasing demand. With regard to petroleum (Chapter 4), reserves of oil are available, but many of the countries with petroleum reserves do not have a strong incentive to increase production. “We’re not dealing with an absence of oil,” said Samuel Bodman. “We’re dealing with the fact that a large fraction of the oil that is in the world—and we know where it is—is in the hands of national oil companies that are seeing $110 a barrel today for the price of oil, and they are looking at that price going up. They are starting to ask the question, in my judgment, why should they produce it now when they can produce it next year and make more money?”
Supplies of natural gas also are constrained. Russia, which has the world’s largest known natural gas reserves, has indicated that it will not develop the Yamal gas field fast enough to meet the growing demand in Western Europe,