Introduction: The End of Cheap Oil and Its Implications for South Africa

Abstract

Oil is the master resource that fuels the world economy, providing 33 % of global primary energy supply, meeting over 40 % of final energy demand, supplying 95 % of the energy powering global transport systems, and providing feedstock for the diverse petrochemicals industry (IEA 2013). For over a century, and especially since the Second World War, growth in the world economy has been strongly correlated with growth in oil consumption (Hall and Klitgaard 2012; Hirsch 2008). Oil has impressively boosted agricultural productivity and thus allowed a massive expansion of the world’s human population from two billion in 1930 to over seven billion today (Brown 2008). Cheap transport fuels derived from oil have enabled the globalisation of the world economy and the urbanisation of half of humanity (Rubin 2009). The International Energy Agency (IEA 2012) has forecast that global demand for oil could grow by 14 % by 2035, with all of the net additional demand projected to come from emerging economies. This rise in demand is expected to be driven almost entirely by increasing use of motorised transport for both passengers and freight as incomes rise in developing countries. This forecast is however premised on the assumption that the world economy will grow by an average annual rate of 3.5 % over the period and that oil prices will reach only $125 (in 2011 dollars) by 2035. However, there are many reasons to doubt these assumptions (Wakeford 2012).