The future of energy supply: ability to meet future demands and ensure sustainability

Author: Iloka Benneth Chiemelie
Published: 28-November-2014

1.      Introduction

Understanding the future of energy is critical for the sustainability of the human race. This is because energy plays crucial role in our existence as it fuels both our daily personal and commercial life. Without energy, the world as we know it will not be so comforting. As such, this paper will seek to understand the future energy supply in terms of its ability to meet demand and ensure sustainability, as well as factors that will bring about or hinder such outcomes.  

2.      The need for a reliable solution to climate change

As Henry et al. (2008) argued, climate change does pose a serious threat to the global economy. This is because it does interfere with every aspect of economic activities and it reshapes the outcomes expected from such activities. For instance, in the agricultural sector, increasing flooding has bene known to damage crop –bring about decline in yield. With the decline in yield, all operating capital invested in such crop cultivation are also lost. Thus, lose experienced in the economy as a result of climate changes doesn’t necessary apply to a single direct outcome, but it can instead stretch further to other negative outcomes. Thus, climate change is a serious threat to the global economy and it should be combated.

However, climate change might turn out to be relatively harmless as Henry et al. (2008) continued to argue, and the attributed this to be the major reason why government don’t have any long-term commitment effort to combating climate change because such efforts would make little economic sense presently.

The authors continued to argue that on the other hand, climate change can end up as a real global threat that can question the sustainability of the human race (Henry et al., 2008). Thus, they recommended two major strategies as: 1) development of new and innovative technologies that will be used to tackle climate change; and 2) adoption of the right policy to ensure reduction in emission and effective management of climate change (Henry et al., 2008).

To “Koyoto mandate” has offered the right path to such solution as numerous countries such as the EU, USA, Canada, China, Japan and etc. have all pledged to reduce their level of carbon emission in order to effectively manage climate change. Thus, the view of these nations and their decision to adopt such policy does signify their understanding of the huge threat posed by climate change.

3.      The threats of “peak oil” to the global economy

As the global economy struggles to recover from recent recessions, it does face numerous years of lower oil price and overall demand. This is good for the customers as they now enjoy higher value for money. However, this will definitely change at some point in time as Scott and Jaeson (2009) have argued. This is because if the global economy fully recovers from the recession, consumers will be offered higher purchasing power – forcing them to increase their demand in order to increase overall utilization of oil – effectively leading to rebound effect of peak oil pricing. Such an effect will have a number of negative outcomes on the global economy and they include:

1.      It will threaten savings – as companies and individual consumers fight to maintain / sustain their level of oil consumption, they will be forced to increase their budgeting for oil.

2.      It will increase debt – in order to increase their budgeting for oil, companies and individuals will have to borrow more.

3.      Inflation will he higher – the prices of commodities will also increase as production costs are transferred to consumers.

4.      Demand will reduce – the demand for both oil and commodities will reduce due to the increased inflation.

5.      A boom and boost recession in the making – with all these issues pilling up (increased borrowing, increased debt, reduced demand for oil and commodities, reduces sales, huge loses for companies), a recession will effectively follow up (Scott, 2009). Thus, it is clear that peak oil pricing will threaten the sustainability of the global economy.

4.      The need for countries to increase their energy security

As projected above, peak oil pricing will bring about numerous negative effects to the economy with a global recession in the making, it is recommended that countries should increase their energy security to offset these effects from oil and better protect their own economy. Thus, it is very much possible for countries to increase their energy security. This can be done by developing new sources of energy (e.g. hydro power, nuclear power, solar energy, coal etc.) as such sources of energy can be effectively used to offset changes in oil demand and supply when the time comes.

5.      Effects of the new global energy economy on developing countries

Henry et al. (2008) did argue that the new global energy economy will have negative effects on developing countries. This is because these countries (such as China and India) rely heavily on importation of energy resources (such as oil, coal, etc.) to meet their local demands – with a subsequent increase in industrialization and production. Thus, their economies are left open to negative effects from fluctuation in pricing (such as peak oil pricing). As such, they will be losers in the new energy economy. For instance, if the price of oil increase, it will affect their production and profitability due to their high reliance on imported energy sources. However, if the prices remain stable or decrease, they can effectively be made winners. As such, whether or not they are winners and the extent of their winning will depend on changes in global energy prices in which increase in price make them losers and decrease in price make them winners.

6.      Conclusion

In conclusion, as the global economy rebounds from recent recessions, it is expected that such rebound effects will have negative implication on energy pricing because it will lead to peak oil pricing with a subsequent recession. However, countries can be able to offset this predicament by enhancing their energy security.

7.      References

Henry, D., J., Ronald, G., P., and Richard, S. (2008). Needed: A Realistic Strategy for Global Warming. Available at: http://globalchange.mit.edu/files/document/MITJPSPGC_Rpt21.pdf [Accessed on: 27-09-2014].

Scot, S., N. (2009). Are We Headed for Another Oil Shock? Bloomberg Businessweek: Global Economics. Available at: http://www.businessweek.com/globalbiz/content/jul2009/gb20090729_550682.htm [Accessed on: 27-09-2014].

Scot, S., N., and Jaeson, R. (2009). Why energy demand will rebound. Insights & Publications, McKinsey and Company. Available at: http://www.mckinsey.com/insights/energy_resources_materials/why_energy_demand_will_rebound [Accessed on: 27-09-2014].