No sooner had I begun writing this column when – with clear skies and moderate temperatures, mind you – we lost electricity. The desk lamps went out, the computer screen flickered off, and then just like that, the electricity came back on.
Muttering under my breath while the computer rebooted and the internet router reset, I contemplated the lesson that the Oklahoma power grid had just delivered of how accustomed to and reliant I am on ubiquitous, affordable electricity to run my life. My level of annoyance when it goes out borders on irrational.
My kids are quick to remind me at such times that this is a first-world problem. They’re talking about my sense of entitlement, but the fact is that the problem is worsening.
“Power outages have more than doubled from 2016 to 2022, with 2022 setting a record of 290 outages despite fewer weather-related events than in prior years,” wrote David Holt of the Consumer Energy Alliance in a Sept. 11, 2024, piece for RealClearEnergy. This analysis uses data from a U.S. Department of Energy database of grid disruptions.
The culprit according to many experts, he observed, is prematurely taking “24/7 ‘permanent’ and dispatchable electricity generation” offline as a result of misguided policy decisions.
“The Blackouts Are Coming! The Blackouts Are Coming!” is the title of his piece, and in it he warns that the United States facing “increasing energy demands and an aging infrastructure,” must “start planning now for a future where reliable power can no longer be taken for granted.”
Oil and Gas Will Remain Critical
In their annual energy outlook, released in August, ExxonMobil observed that “the world will be different in 2050, but the need to provide the reliable, affordable energy that drives economic prosperity and better living standards, while reducing greenhouse gas emissions, will remain just as critical as it is today.”
Oil and natural gas continue to play a vital role. ExxonMobil’s outlook – like many others – projects that they will represent more than half of the global energy mix in 2050, with oil demand plateauing beginning in 2030, but remaining more than 100 million barrels per day through 2050.
Electrification is a persistent and continuing trend, including in transportation – gasoline demand will decrease. But even “if every new car sold in the world in 2035 were electric, oil demand in 2050 would still be 85 million barrels per day. That’s the same as it was in 2010.”
And we’re a depletion industry, so each barrel consumed must be replaced just to keep production flat. ExxonMobil has increased natural decline in its model to about 15 percent to reflect the growth in supply from unconventional resources, which tend to have a steeper decline curve. This means the investment required to find and deliver the supply to meet this future demand is significant.
Here’s an eye-opener: if all new investment in oil exploration stopped now, oil supply would drop from 100 million barrels per day in 2023 to 30 million barrels per day by 2030. The resulting price shock would cripple the global economy.
This isn’t simply a first world problem.
Demand Will Increase
ExxonMobil calculates that around 4 billion people – that’s half the global population – live below the “modern energy minimum,” which works out to per capita annual energy consumption less than 50 million British thermal units (for reference: 1.039 MMbtu = 1 thousand cubic feet of natural gas).
The developing world above the modern energy minimum uses an average of 110 MMbtu of energy per capita each year, while developed countries average 160 MMbtu per capita. In 2023, the United States per capita energy consumption was about 279 MMbtu.
“Access to energy drives human development and quality of life,” according to the outlook, and “providing for the basic energy needs is a must to meet the UN’s goal to ‘end poverty in all its forms everywhere.’”
The world expects to add an additional 2 billion people by 2050, rising to 10 billion. How do we manage that growth in population and also reduce energy poverty? Quoting from the report, “the world will need new ways to:
- Produce more reliable, affordable energy
- Drive global economic growth to raise living standards, particularly in the developing world
- Further reduce greenhouse gas emissions
But how are we doing?
“Almost all of the progress in the fight against poverty was achieved in the first 15 years of the 2000s,” according to an article titled “End of the Road” in the Sept. 21 edition of The Economist.
There are several factors to explain why “in 2022 just one-third as many people left extreme poverty as in 2013.” Economic growth is a significant factor, and the easy gains beginning in 1995 occurred in China, India, SE Asia, and Eastern Europe as they adopted new technologies and began to grow, lifting many people out of poverty.
As these countries got richer, what failed to materialize was a rotation to the next group of economies, ready to accelerate their growth. The COVID pandemic was a shock, as were higher interest rates, and a general slowdown in global trade.
“The result is that by the end of last year, GDP per person in Africa, the Middle East, and South America was no closer to that in America than in 2015.”
One thing struck me reading The Economist article: there was no mention of energy. There were vague references to infrastructure investment, but nothing about the role of this fundamental building block of any economy.
Affordable, reliable energy isn’t the only ingredient necessary for economic growth, but you can’t grow an economy without it.
Meeting this need isn’t a first world problem, it’s a whole world problem.