World oil shortage may become chronic The current oil crisis may be but a foretaste of more chronic world shortages to come. These future shortages, moreover, are likely to stem less from short-term political factors, as today, than from world demand outrunning available supply. As Exxon chief economist James W. Hanson put it recently: "The world is witnessing a major change in its energy environment. Supply constraints are likely to characterize this environment for years to come." Although present oil shortfalls can be expected to ease once the Arab embargo is lifted and to ease still more three or four years down the road, when new U.S. refinery capacity is on stream, the long-term outlook for energy is full of uncertainties. Worldwide demand for energy grew at a rate of more than 5% a year during the decade of the 1960's. Barring supply limitations, it is expected to grow at a similar rate during the decade ahead. Petroleum now supplies half or more of that demand, and even assuming stepped-up use of coal or nuclear power, it is likely to remain the world's primary source of energy in the foreseeable future. Exxon estimates, for example, that with no constraints on supplies the world would consume about 100 million barrels of oil a day by 1985, nearly twice what it does now. The major source for the increased amount of oil needed remains the Middle East, which now has more than half the world's discovered reserves. Largely as a result of discoveries in the Mideast, the non-Communist world has been uncovering new oil to the
tune of about 20 billion barrels annually for more than two decades. This has been well above the rate of annual consumption. But discoveries in the Mideast have been declining. And although more oil has been uncovered elsewhere in recent years, this increase has not been enough to add significantly to total finds. Meanwhile, the rate of consumption is bending up rapidly past the 20 billion barrel-a-year level. Long-term growth trends suggest, according to Mr. Hanson, that the Mideast may be called upon to supply about half the world's need for oil— perhaps 50 million barrels a day—by 1985, nearly three times the amount it provides now. But even the reserves of the Mideast have limits. Output at a 50 million barrel-a-day rate probably would be unsustainable for long, and by the 1990's it might well be declining rapidly. And a more likely prospect is that the Mideastern producing countries will be reluctant to let production rise to that level in any event. The upward price spiral for crude, in fact, may permit many of the smaller nations to meet their economic needs at lower levels of production while stretching the life of their resources. There is also the question of whether the non-Arab world could pay for such heavy imports, even if they were offered, without cataclysmic economic impact. Estimates by the World Bank indicate that the total revenues of the members of the Organization of Petroleum Exporting Countries could rise nine- to 10-fold or more by 1985 from 1973's $22.7 billion, even without a major increase in current oil prices.
World oil use soon will outrun new discoveries 40
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a Five-year average, excluding Communist countries, b. Excluding Communist countries. Source: Exxon Corp.
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Jan. 28, 1974 C&EN
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