Energy Future Now Is More Predictable and Challenging

Uncertainty has not been banished, but a few inevitabilities are now clear.

Here are the certainties:

1.  Oil exporters led by Russia, Saudi Arabia, and Mexico will not expand production much further.

2.  Oil exporters' internal oil demand will soon cause supplies of oil on the export market to begin falling.

3.  Food based ethanol production will not expand much further.

4.  Oil sands production growth will be limited by environmental concerns.

5.  Costs to produce new off shore discoveries will continue to escalate. 

5.  The developing, non-oil-exporting world will continue to grow demand for fuel faster than OECD conservation efforts will slow it.

Some important uncertainties still exist:

1. Nigerian and Iraqi oil production could expand or contract markedly over the short and intermediate term.

2. Ghawar could begin to decline, perhaps rapidly, along the lines of Cantarell.  Ghawar was better managed but it is OLD. 

Some outcomes are now clearly very probable based on the above certainties:

1. Total all liquids production looks to start falling within five years.

2. Supply will fall well behind demand long before total liquid supplies fall.

3. When cellulosic ethanol becomes commercial it may only substitute for humanitarian-based cutbacks in food grain ethanol.

4. the price of light, sweet crude will do nothing but rise steadily and substantially.

5. North American natural gas prices will also be pulled up despite rising supplies as oil rises and as European and Asian supplies are squeezed .

6. The ultimate transportation system will include electric cars and electric rail for both intra- and inter-city mass transit.

7. Higher oil prices will force a more rapid transition to the electric future. 

8. Higher energy prices will be increasingly painful for the lower and then the middle classes, causing some political turmoil.