Energy trends: what lies ahead for 2012

Paul Boughton

The international energy industry will continue to be divided on how to address the issues of energy security and environmental sustainability in 2012 due to the exploration of unconventional gas and oil, according to a new study by the Economist Intelligence Unit
 
* Energy-related carbon-dioxide emissions grew by more than 5 per cent in 2010, reaching record levels according to the International Energy Agency
* Despite this, 73 per cent of energy and natural resource executives believe that a post-2012 Kyoto agreement will fail.
* Shale gas is viewed by some as the answer to energy security, with output rising to 25 per cent of the US natural gas consumption.
* 54 per cent of industry executives survey did not believe that brent oil prices would stay below US$100 per barrel in 2012.
 
As 2012 beckons there remains a general sense of crisis about energy despite the IEA’s warning to reduce carbon emissions within the next 10 years or face a significant rise in global temperature. The EIU forecast that the energy industry will experience a growing divide between those in the industry promoting energy security and green groups who argue that these new sources of hydrocarbons are not environmentally sustainable, based on a recent survey of energy and natural resource executives. [Page Break]
 
73 per cent of energy and natural resource executives believe that a post-2012 Kyoto agreement will fail on the basis that the latest United Nations Climate Change Conference in Durban was unable to create a universally binding treaty to replace the Kyoto Protocol. Most industry executives view the debate on the exploitation of unconventional oil and gas as the major division hindering the industry from addressing energy security and environmental sustainability in 2012.
 
The explosive growth in shale gas output in the US since 2006 is raising hopes among energy-consuming, resource-deficient countries for realising their energy security objectives. It also highlights the role of natural gas as a partial solution to controlling carbon emissions, given that gas-fired power stations emit less carbon dioxide than coal-fired plants. But the impacts of the practices used in developing unconventional oil and gas, and the environmental risk involved in deep water oil drilling will sharpen the divide between those in the industry promoting energy security and green groups who argue that they are not environmentally sustainable.
 
Uncertainty extends to the oil industry as prices continue to bubble at around the US$100 per barrel level. There is little in the way of unanimity in the energy industry concerning where prices might be headed. When asked whether Brent oil prices would stay below US$100 per barrel in 2012, 39 per cent of survey respondents agreed (13 per cent strongly and 26 per cent slightly) and 54 per cent disagreed (38 per cent slightly and 16 per cent strongly). It seems to depend on the severity of economic conditions or the political temperature in the Middle East.[Page Break]

Overall, the energy industry is marked by significant uncertainty and a long list of worries in 2012.
 
The Economist Intelligence Unit (EIU) is a leading resource for economic and business research, forecasting and analysis.

The full report is available at: http://www.eiu.com/public/topical_report.aspx?campaignid=Industries2012
 

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