Less than 50 Years of Oil Left, HSBC Warns

The world may have no more than half a century of oil left at current rates of consumption, while surging demand from the developing world threatens to create “very significant price rises” before substitutes like biofuels can serve as viable alternatives, the British bank HSBC warns in a new report.

“We’re confident that there are around 50 years of oil left,” Karen Ward, the bank’s senior global economist, said in an interview on CNBC.

The bank, the world’s second largest in assets, further cautioned that growth trends in developing countries like China could put as many as one billion more cars on the road by midcentury. “That’s tremendous pressure on oil to power all those resources,” Ms. Ward said.

Substitutes, such as biofuels and synthetic oil from coal, could fill the gap if conventional supplies fall short, but only if average oil prices exceed $150 per barrel, the report notes. Increasingly tight global supplies, meanwhile, are likely to cause “persistent and painful” price shocks, it says.

Some oil industry observers take a more optimistic view of future supplies, arguing that further development of Canadian tar sands, offshore discoveries in the Arctic and an expected surge in supply from Iraq will keep oil markets well-supplied for decades. Shale drilling has also managed to boost domestic oil production in the United States after years of decline.

Yet in a clear illustration of the vulnerability of world oil markets to even minor disruptions, the war in Libya — which has taken a little more than 1 percent of global supply offline — is considered a key factor in the rapid run-up in oil prices since the beginning of the year. Brent crude, a European benchmark, settled at nearly $115 per barrel on Tuesday, up from about $74 less than a year ago.

The HSBC report further notes that even without a shortage in oil supplies, the uneven distribution of remaining energy resources will probably shift the balance of economic power globally in the coming decades. It estimates that the biggest loser in this regard will be Europe, where energy scarcity may significantly hinder economic growth by midcentury.

“They could be losing their influence on the world stage just at the time when they are most vulnerable,” the report says.

NY Times