Energy situation near tipping point, says Shell analyst

Warning comes even as oil prices ease slightly from near US$140 record high
Yang Huiwen, Straits Times 18 Jun 08;

SOARING oil prices have driven the world to an energy tipping point where cheap, plentiful supplies of crude and gas can no longer be taken for granted.

The warning came from Dr Khong Cho Oon, chief political analyst in the global business environment team of Shell International, a unit of the Anglo-Dutch oil giant.

Dr Khong, who was in Singapore for a seminar, said yesterday that the old system of affordable energy is no longer tenable.

'We're looking at very high oil prices right now precisely because we're at a transition point in the energy world,' he said.

'We're moving away from a structure that has been in place for many decades, and we're moving into something new. What we're moving into, that is yet to be clear.'

Dr Khong's comments come at a time of rocketing oil prices. They hit a record high of almost US$140 a barrel earlier this week, before retreating a little amid uncertainty over a pledge by Saudi Arabia to boost output.

Prices have risen more than fourfold since 2004 and have shot up over 120 per cent this year alone, partly on increased fears that production will struggle to keep up with demand over the next decade.

Dr Khong, who is based in The Hague, Netherlands, said the key question is whether the transition to a new world energy order is going to be smooth or rough.

The Shell executive is a member of a team that developed two scenarios describing how the world's energy landscape may pan out over the next 50 years.

In a 'scramble' world, concerns over the security of oil supplies dominate decision making, spurring reactive government policies that are based purely on national interests.

In contrast, a 'blueprint' world begins with the mindset of anticipating change, with decisions based on common interest and sustainability. Examples of this approach are the Kyoto Protocol and the Bali climate talks.

While elements of both scenarios are now present, one will eventually dominate the world, much like the wave of globalisation in the 1990s, said Dr Khong.

It is difficult to tell which way the world is heading, but he favours a scenario with more proactive engagement.

This will require 'a critical mass of countries to move along a particular direction', with the key nations being the United States and China, as well as other major players such as the European Union, Japan, India, Brazil and Indonesia.

This can be driven by people's concerns at the grassroots level, which will eventually lead to action at the state and government level.