Every year, BP publishes its statistics which are an authority and which recount, country by country, the evolution for the last ten years of the production and the consumption of each category of energy. This year report brings the confirmation of a phenomenon which totally invalidates pessimistic forecasts of the last thirty years. We could even go back to the “club de Rome” studies according to which the resources of the planet being limited, we should be prepared to manage their scarcity, especially regarding oil and natural gas. Coal, temporarily, was not concerned by these analysis but the same reasoning, sooner or later, would be applied to it. Figures published by BP for the last ten years show how these ideas were wrong. And both economic and environmental consequences of this new situation are huge.

Between 2005 and 2015, oil production jumped from 81.9 to 91.7 barrels per day, an 11.7% increase. Regarding natural gas and coal, the increase is twice more important, with respectively 26.8% and 26%. But coal production peaked in 2013 and is slowly going down, not due to the depletion of mines but because of the competition of natural gas in power production. Contrary to what is frequently said, this situation is not only the result of the American shale revolution in the production of oil and natural gas. Oil production of this country, thanks to new technologies related to oil extraction, has profited of  a spectacular rebound and has reached in 2015 12,7 millions barrels per day, after stagnating around 6.8 million barrels per day for years. It has reached the same level than Saudi Arabia. Growth should not be stopped since Congress, at the end of last year, authorized exports. Until then, as refinery capacity was saturated, producers were impeached to increase their production. This obstacle is now removed. Same rebound for Canada which had a similar rise of its production. Middle East turmoil has not prevented production to maintain its high level, except in Libya where civil war has provoked a 65% fall, but Iran comeback on the world market will compensate the reduction of Libyan exports. Oil production is increasing, as in Brazil or is maintaining its high level everywhere except on North Sea where, it’s true, oil resources are depleting.

Natural gas situation is even more spectacular.It is taking advantage of the strong demand coming from countries which are confronted with unacceptable pollution levels, as in China, or which want to reduce their CO2 emissions, as in the United States. They are shifting power production from coal to natural gas; so, for the first time, in 2016, American power production from natural gas units will overpass coal units. In China, natural gas consumption rose from 48 billion cubic meters in 2005 to 197 billion in 2015. Forecasts for 2020 are around 300 billion cubic meters. These transfers are encouraged by the abundance of the resource and by its very competitive price, since it is linked, on some markets to the oil price. About that, it is time to track down two other wrong ideas. First, oil price is abnormally low. If we look at the last thirty years, we see that, after the peak resulting from the second oil shock, in 1978, during six years, it was rather stable around 30$ as a yearly average. Then, from 1986 to 2004, it went down and has fluctuated between 15 and 25$. The gap between the new investments to increase capacities and the growth of demand, coming mainly from China, has provoked a very substantial price increase between 2004 and 2013 which was wrongly attributed to this so expected scarcity. Peak oil theorists came back on the front scene. But geology and technology regained the upper hand and prices fell. OPEC, in the same time, lost any influence on their level. It is what we see today.

The second mistake is to think that these new technologies, at the origin of the shale boom are just delaying the maturity and that the current situation is an interlude. It is wrong for two reasons. First, American production is far from having reach its peak, notably regarding natural gas. But also, nobody can believe there are no other such fields elsewhere in the world. Latin America, China and, of course, Russia, with its huge plains in Siberia, have the same resources. They are not yet in production, since the market is in surplus and, in these countries, the production of conventional fields, is the priority. The current level of prices will stay for a long period of time. To elaborate an energy policy, as far as a State is concerned, or a company strategy, with different hypothesis or based on a depletion of the resources, will unavoidably end in failure.

This fossil fuels abundance is also very good news for the fight against CO2 emissions. Power unit conversions from coal to natural gas, facilitated by the price evolution, even if also coal prices fall, will permit a much quicker reduction of emissions than, the American case proves it, through aggressive policies in favor of renewable. These energies are intermittent and must be granted costly aids. There are some particular cases, not connected islands, large deserts in Asia or in Sahara for instance, or some province in India, where these technologies make sense and where they will permit to fulfill power demand growth. But, in developed countries, which are very important issuers of CO2, they are rarely able to meet expectations. For the same reason, buildings isolation, construction of houses with “positive energy” are going, of course, in the right direction but have an extremely low impact on emissions since it is the whole stock of buildings which is the source of emissions, and not only new constructions which rarely represent more than 1% of the energy consumption. And financial aids granted to improve energy efficiency did not, until now, reach their objectives.

The paradox of this situation is that everybody seems to have understood the change occurred on fossil fuel markets except Europe which still gives a privilege to coal to protect German and Polish producer positions. In disrupting power market at some periods of the year, when climate condition are favorable, Brussels, knowingly or not, has weakened utilities and made more difficult their change toward an electricity mix less emitter of CO2. In blocking, once more, due to the influence of Germany, the rebound of carbon market, Europe renounced to an efficient tool to encourage economic agents to adopt attitudes in line with environmental challenges. With such contradictions, and the CO2 issue is just an example, it is not surprising that people become more and more skeptical about the benefits of the European project.