Globalization and Energy Supply
Strategic Risk in the 21st Century
Inexorably, energy demand is growing – not only in the developed economies of Europe, Japan, and North America, but in developing nations as well. In fact, the fastest demand growth is in China and other emerging markets. From one side of the globe to the other, modern and modernizing societies need more fuel. But the places with the greatest demand can’t supply their own needs. Over the next few decades, oil and gas production in the North Sea, North America, and China are expected to fall, or rise too little to keep pace with demand. Only a few places have surplus reserves – chiefly the Middle East, Africa and Russia.
Meanwhile, massive infrastructure additions are required. New construction, repairs, and upgrades are imperative all along the energy supply chain, from oil and gas fields to pipelines and tankers to power plants and grids. The cost will be huge – the International Energy Agency estimates $16 trillion between now and 2030. Among the most critical needs are new production and transport facilities in the Middle East, Africa, and Russia, none of which can muster the necessary capital on its own.
Decision-makers in the energy industry, government, and international agencies thus face difficult decisions. How will the supply-demand problem be resolved?
At the other extreme is a future that involves more regulation and confrontation. Rather than free markets, anxious governments will decide how capital and energy supplies are apportioned. Further, who gets how much access to the coveted resource-rich areas will be affected by political dynamics within those regions – and perhaps by aggressive energy have-not nations seeking to gain advantage through geopolitical maneuvering and even military might. Rather than globalization, this would be “deglobalization.” In between these extremes are many variations and gradations. None would bring an easy time for energy companies.
How can a company position itself to deal with such uncertainty?
Strategic Flexibility is the answer – a set of insights about effective planning developed by Deloitte Research. Applying this approach enables a company to deal with multiple contrasting versions of tomorrow’s world.
Read the full report prepared by Deloitte Developent LLC, in the PDF , to learn more about Globalization& Energy Supply.