The lifestyle of the 20th century man has been influenced more by oil and gas than any other natural resource, and indications are that oil and gas reserves will increase in importance the remainder of this century. Oil and gas production provides inexpensive portable energy and supplies feed stock to an international petrochemical industry that manufactures synthetic textiles and medicines and supports world agriculture. Crops are planted, cultivated, treated with pesticides, fertilized, harvested, moved to market, and cooked with oil and/or gas. Wars have been fought to ensure petroleum availability, and reserve estimates have dictated actions of governments, entire industries, individual companies, lending institutions, and private investors. Almost all applications of oil and gas reserve estimates require, in the final analysis, an economic evaluation that considers the predicted production capacity and the capital and operating cost estimates.
Examining the reform experience and lessons in the developing countries it is obvious that they have to consider technically and financially less efficient electricity sectors than developed countries with less resources and weaker institutions. Private participation and key reform steps such as restructuring, competition, and regulation would be significant. The role of contextual factors such as system size, institutional endowment, and international organizations become important and it is then argued that there is a need for redefining the role of the state rather than a full withdrawal from the sector and that many countries like Pakistan should adopt simpler reform models and gradual implementation.
The emerging international evidence suggests that the standard reform model, privatization, vertical and horizontal unbundling, and the introduction of performance-based regulatory mechanisms, if implemented correctly, can lead to significant improvements in several dimensions of operating performance.
When examined, there is often a poorly explored link between power sector reforms and wider institutional reforms in the economy across different groups of developing countries. Research shows that when panel-data econometrics based on bias corrected dynamic fixed effect analysis (LSDVC) was used to assess the impact of reforms on macroeconomic and power sector outcomes. The results indicated that power sector reform is highly inter-dependent with wider reforms in other sectors of the economy. These findings indicate that failure to harmonize inter-sector reforms leads to power sector reform measures being ineffective. Hence it can be concluded that the success of power sector reforms in developing countries largely depend on the extent to which they synchronize inter-sector reforms in the economy.
How real and long lasting is the current energy crisis? There is reason to believe that domestic fossil fuels will not continue to be available, due to slowly declining reserves and no alternate energy resources found in adequate amounts to support total anticipated energy consumption. Worryingly, if energy sources take an increased proportion of the load, the fossil fuels will not last correspondingly longer. Thus, the current energy crisis, although very real, should be viewed as a transient perturbation of the long‐term trajectory of our energy economy. Estimates of energy resources and projections of future energy consumption show that the country has limited fossil fuel reserves. The energy problem is more political than economic in nature, and underlying political differences must be understood in order to appreciate the effects on world-wide interdependence of petroleum supplies and prices.
Energy future studies can be a useful tool for learning about how to induce and manage technical, economic and policy change related to energy supply and use. The private sector has successfully deployed them for strategic planning, examining key parameters such as markets, competition and consumer trends. However, in public policy, most energy future studies remain disconnected from policy making. One reason is that they often ignore the key political and institutional factors that underpin much of the anticipated, wished-for or otherwise explored energy systems developments.
We know that institutions and politics are critical enablers or constraints to technical and policy change. It is critical to examine how analytical insights into political and institutional dynamics can enhance energy future studies. It requires developing an approach that combines technical systems change scenarios with political and institutional analysis. Using the example of a back casting study dealing with the long term low-carbon transformation of a national energy system, it applies two levels of institutional and political analysis; at the level of international regimes and at the level of sectoral policy. This study examines how future systems changes and policy paths are conditioned by institutional change processes and finds that the systematic application of these variables significantly enhances more useful back casting studies of energy futures.
Nowadays, ambitions of a comprehensive energy policy make developing counties one of the most interesting regions with regard to energy security. However, not only the European Union (EU) but also the International Atomic Energy Agency (IAEA) and the North Atlantic Treaty Organization (NATO) are or will be relevant actors in the global struggle for affordable, sustainable, and sufficient supplies of energy. All three have developed more or less distinctive instruments to secure their members’ access to energy. Nevertheless, there are three problems that prohibit the Europeans from being important players in global energy politics. First, the EU Member States do not have sufficient indigenous reserves of energy and thus are dependent on foreign suppliers. Second, Europe and its partners lack, as of yet, a comprehensive strategy for dealing with the external aspects of energy politics, including supply security as well as the political and economic challenges of import dependency and energy cut-offs. Third, the problem of energy security can be resolvable only if inner-EU coherence and later on, regional and global energy governance can be established.
Energy security has again become an important public issue amid concerns about high energy prices and the occurrence of regional supply shortfalls. An assessment of the current state of oil security indicates that the risks of supply disruption have not diminished. The oil market outlook for the next two decades suggests an even greater need for oil security protection. With the growing significance of global gas demand and trade, gas security is also becoming increasingly important. In conclusion, although no global energy crisis appears to be on the horizon, some serious security concerns do exist and will likely intensify in the future. This means that there is no room for complacency on energy security. The existing oil emergency measures need to be extended to cover the developing countries and other energy sources.
World conventional oil supply will soon be at physical risk. The Middle East countries have only little spare operational capacity, and this will be increasingly called upon as oil production declines elsewhere. Large investments in Middle East production, if they occur, could raise output, but only to a limited extent. A partial exception is Iraq, but even here, there would be significant delays before prospects can be confidently confirmed. If demand is maintained, and if large investments in Middle East capacity are not made, the world will face the prospect of oil shortages in the near term.
Even with large investments, resource limits will force Middle-East production to decline fairly soon, and hence also global conventional oil production. The date of this resource-limited global peak depends on the size of Middle East reserves, which are poorly known, and unreliably reported. Best estimates put the physical peak of global conventional oil production between 5 and 10 years from now. The world contains large quantities of non-conventional oil, and various oil substitutes but the rapidity of the decline in the production of conventional oil makes it probable that these non-conventional sources cannot make fast enough to fully compensate. The result will be a sustained global oil shortage. For conventional gas, the world’s original endowment is probably about the same, in energy terms, as its endowment of conventional oil. Since less gas has been used so far compared to oil, the world will turn increasingly to gas as oil declines. But the global peak in conventional gas production is already in sight, in perhaps 20 years, and hence the global peak of all hydrocarbons (oil plus gas) is likely to be in about 10 or so years.