By James Rickman, Energy Analysis - January 2010 

(Copyrighted 2009@ James Rickman, SVS)

Energy is the basic element necessary for people to achieve economic recovery, R&D innovations and manufacturing growth.  Its sources can be non-renewable fossil fuels including oil, coal, natural gas or renewable energy alternatives such as wind and hydro turbines, PV solar cells, and biofuel (ex. algae, cellulosic biomass, Jatropha, palm oil).

Regardless of where energy is derived, it always equals economic power for the increasing populations worldwide. By 2025, the world will add another 1.4 billion people creating an energy hungry workforce of the nearly 700 million new middle class people. China alone represents 350 million with India adding 100 million to the total emerging middle class population. This rapid growth will nearly triple worldwide energy demands within the next 15 years.

Today, the United States is addicted to oil consuming over 22% annually of the world’s total oil production or 19 million barrels per day. Yet the U.S. maintains only 4.5% of the world’s population, a minute fraction in comparison. America is responsible for over 25% of the worlds CO2 greenhouse gas pollution.

To fully understand the urgency of the “energy independence” issue consider that despite trillions of dollars in debt, the United States still imports two-thirds of its oil at a cost of over $535 billion per year. Much of it is from politically unstable regions that harbor terrorist including South America, Africa and the Middle East that control 55% of world oil supplies.

Let’s also consider the fact that the majority of oil wells today have reached their “peak production”.  Already we find examples, as of last year Mexican oil producer Cantarell’s production fell about 9.6% every quarter. In the third-quarter, Cantarell produced less than 1 million barrels daily for the first time. As recently as 2005, the Gulf of Mexico field has been producing more than 2 million barrels per day. The declining production, due to aging oil wells, adds economic stress in the form of less revenue. This has threatened 40% of the Mexican government budget. Allowing wealthy illegal drug cartels to run rampant buying influence. The implications for the American population is profoundly significant. Mexico once provided on average 1.2 million barrels of oil per day, making it the third largest supplier after Canada Athabasca Oil Sands and Saudi Arabia. See PetroChina Int. Buys Canadian Oil Sands Projects

It is relatively straight forward to calculate that from the existing aging oil well data the world petroleum production life cycle by 2011 will have reached “peak oil” with production declining in the following years. Therefore, a steady decline in oil output worldwide will be unable to cost effectively meet the exploding middle class population needs driving up the overall price of oil and alternative energy more cost competitive.

For example between 2002 to 2035 the major oil producing countries will have seen output declines as follows;

Canada (-62%), Mexico (-92%), USA (-90%), Brazil (-64%), Venezuela (-46%), Former Soviet Union (-70%), Iran (-62%), Iraq (-45%), Kuwait (-44%), Oman (-81%), Qatar (-82%), Saudi Arabia (-48%), UAE (-65%), Nigeria (-69%), Libya (-78%), China (-63%), Indonesia (-71%).

Where do we find enough resources to meet the world’s energy demands?

The answer lies in developing a mix of renewable energy sources including wind, solar, hydro natural gas and biofuels that also complements sensitive global environmental warming issues. Instead using cleaner sustainable resources.  Today, the challenge is to manufacture and deliver alternative energy via efficient existing fuel distribution and new SMART Grid networks at prices competitive with dirty oil and coal.

Over the past 12 months, the ability to further develop these clean renewable technologies has attracted over $155 billion of R&D investments capital worldwide. The clean energy market has seen annual growth between 20% - 35% within niche sectors. Particularly, sectors such as wind, hydro turbines, PV solar cell and biomass production are receiving increasing capital.

For example, China using its $2 trillion cash surplus has launched its stimulus plans to spend $558 billion with a large portion of these funds targeted at renewable-energy projects. The Chinese goal is 100 GW of wind power by 2020. 

China’s wind capacity is expected to grow 200% by 2012. That’s more than twice the estimates for the United States. China’s year-to-year growth average is already over 30% for the wind turbine energy sector. And to top it all off, China is working with German and U.S. manufacturers on over 34 new wind farms planned for delivery by 2014. Several wind power industry leaders include Sinovel Wind, General Electric, Vestas Wind Systems, Shanghia East Sea Bridge Wind Power, among others.

By 2012, China’s solar power capacity is set to increase by 255%, thus achieving 37% annualized growth average.  China is already building a 100-megawatt solar power station, the world’s largest. China, U.S. and Germany are now the global leaders in thin photovoltaic (PV) solar cell manufacturing.  Since 2006, China has already spent over $180 billion dollars to develop renewable energy sources. Some PV solar manufacturing leaders include LDK Solar, First Solar, SolarWorld and Suntech Power Holdings, among others.   

China’s automobile ownership population is exploding now for the next 15 years. It is expected to increase by more than 350 million with India at 100 million new vehicles demanding more transportation fuels and energy technology. Both countries are already investing billions of dollars in hybrid electric vehicles manufacturing, smart grid networks and battery technologies.

Think about it. The world currently consumes about 85 million barrels of oil per day. By 2025, global economic needs are projected to reach the equivalent of approximately 124 million barrels a day while oil reserves decline. Further, the demand for food and clean water resources will more double over the next 15-years.

Recently, we have seen the acceleration of leading energy companies (Exxon, Chevron, BP, Eni S.p.A, Enel, Boeing, PetroChina, Sinopec, Gazprom, LUKOIL, Brazilian Petro, Royal Dutch/Shell, Petrobras) and governments investing billions of dollars in promising joint biofuel and biomass cellulosic production developing non-edible resources such as switch grass, wood, African palm oil, algae and Jatropha. Much of the VC money is invested in emerging growth industrial enzyme leaders such as Dyadic International, Synthetic Genomics, Iogen Corporation and Genencor, among others. Promising alternative energy opportunities can immediately help environmental climate issues by reducing CO2 vehicle emissions over 25% and cut 950 million metric tons of greenhouse gases.

Today, we see crude oil prices continue to spiral upwards (recent jumps above $80/barrel with peak oil reserves declining). The rising cost of oil is consistent with economic recovery growth (China, India, Brazil, Australia, Singapore, Africa, Russia, etc). Specifically, it is important to accelerate domestic biofuel production and alternative energy demand in America. It could save on average about $3,000 per auto owner in fuel costs, conserve billion of barrels of oil and set the foundation for energy independence stopping the flow of hundreds of billions dollars out of the United States. Instead building innovative sustainable economic growth by investing that money locally it generates thousands of new jobs for the middle class working people in American.

Demand for energy and petrochemicals used for agriculture is also growing rapidly. Food supplies to the increasing population is significantly impacting limited non-renewable energy resources. Emerging middle class markets such as Brazil, China, India, Indonesia, Korea, Former Soviet Union, Cambodia, Argentina, Singapore, and Malaysia are rapidly demanding more energy. These emerging countries coupled with U.S. markets all represent significant growth opportunities within niche alternative energy sectors for both large and early stage rising companies.

Clearly research indicates high energy demands, keeping the price of oil and other fossil fuels at a premium. It is also becoming a key driver in the global shift towards increasingly cost competitive alternative energy sources. The combination of increasing global energy demands, coupled with declining peak oil supplies, and emerging industrialized pressures will continue to force prices higher and, in turn, continue to accelerate the development of cost competitive alternative energy sources. The traditional large energy companies are focused on investing heavily in emerging clean technologies working in partnership with innovative early stage R&D ventures.  An in-depth understanding of the energy sectors future economic impact and identifying potential winners and losers is the key to maximizing investment returns long-term.

About Author :  Mr. Rickman is a respected analyst, innovative expert in sustainable industries and multimedia services with over 30-years experience. He is published worldwide and author of several books including Eight Billion People.  Mr. Rickman holds advanced business and technical degrees from Boston University.

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James Rickman, Author - Eight Billion People Book , High Speed Rail Industry Report 2010 , Aviation Industry Clean Energy Developments 2010 , SMART GRIDS Cloud Computing 2010

Matthew R. Simmons, Author - Twilight In The Desert

Professor Steven Rayner, The Institute for Science, Innovation and Society - University of Oxford

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