The third oil price surge – What is different this time and what are possible future oil price developments?

Fabian Kesicki, Uwe Remme, Markus Blesl, Ulrich Fahl, and Alfred Voss

The period from 2003 to 2008 was marked by an oil price increase comparable to the two oil price crises in the 1970/80s. Like in the past, different factors were held responsible for the recent price changes. First, our paper looks in more detail into the situation leading to the oil price crises 30 years ago and compares them along various aspects on the demand and supply side with the recent price increase in order to identify similarities and differences of the situation in the past and today and to derive possible measures or conditions that might in the future contribute to an oil price development staying on a comparably low level. Second, based on this analysis of historic oil prices, we use a fundamental theoretic approach by linking an oil market model (LOPEX) with a global energy system model (TIAM-IER) to analyse possible future developments of the oil price up to the year 2050 taking into account the interactions between the supply and demand of oil in the energy sector. Starting from a base scenario for the oil price development, we study the price impact of measures on the supply side and of factors influencing the demand for petroleum, at first separately in individual scenarios, further in a second step in an integrated scenario to assess the combined effect on the oil price. While the oil price would peak in 2030 at about 150 USD2008/bbl under the conditions of the base scenario, measures increasing the liquid fuel supply by a better recovery rate through enhanced oil recovery, an accelerated production from unconventional oil or more optimistic conditions for the production of alternative liquid fuels can reduce the price peak to levels of 100 to 115 USD/bbl in 2030. On the demand side, an assumed lower average annual gross world product growth rate of 2.3 %/a between 2000 and 2050 compared to 2.7 %/a in the base scenario results in a maximum oil price of 90 USD/bbl in 2030. Measures and policies for stabilizing CO2 by 2050 to 20 Gt CO2 (level in 2000) yield to similar oil prices in 2030 of around 95 USD/bbl due to the reduced demand for oil under climate policies. The overall costs for the energetic use of petroleum products are, however, increasing under carbon mitigation policies due to the implied CO2 price penalty associated with the emitted CO2. Finally, different measures and developments on the supply and demand side, which may have the potential to dampen an oil price rise, have been combined in an integrated scenario. This scenario indicates that the oil price may be kept over the next four decades on a level between 50 and 60 USD/bbl. Adding to this scenario a CO2 mitigation target, which drives back global CO2 emissions in 2050 again to 2005 levels, results only in a further price decrease of around 10 USD/bbl. So, overall the combination of different measures on the supply and demand side could stabilize the oil price between today and 2050 in a price range between 40 to 60 USD/bbl, which is far below the oil price development of the base scenario, though the return to the oil prices of 20 to 30 USD/bbl after the two oil price crises in the 1970s seems to be very unlikely for the future. - THE THIRD OIL PRICE SURGE -- What Is Different This Time and What Are Possible Future Oil Price Developments?

http://mrzine.monthlyreview.org/