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in the strength of the dollar: in November 2010, when the WOO 2010 was released, the €/$ rate averaged 0.73, similar to the rate of 0.70 in July 2011. Finally, changing fiscal needs in OPEC Member Countries could be seen as an influence in the development of Reference Case oil price assumptions. Recent analysis has suggested that the price assumption in the WOO 2010 is now below the fiscal breakeven price in many OPEC countries. 9 In conclusion, the 2011 Reference Case oil price assumption is raised from its previous levels, but only moderately. It is assumed that the ORB price, in nominal terms, eventually settles in the range of $85–95/b for this decade, but rises over the long-term to reach $133/b by 2035. Medium-term economic growth Following the sub-prime crisis in the US and the collapse of Lehman Brothers in 2008, the global financial system appeared on the brink of meltdown. While the world was able to draw back from the precipice, high levels of sovereign debt have since triggered significant austerity measures in developed countries and brought about the threat of default. The current situation, particularly in the euro-zone and the US, may trigger further austerity measures that could curb growth in the medium-term in much of the developed world. While developing countries have seen growth return to healthy rates, they too are facing some uncertainties. The biggest short-term uncertainty appears to be the result of their high dependency on exports to developed economies. Moreover, there have recently been significant increases in inflation with measures already being introduced in several emerging economies to combat this. This may lead to a slowdown in their economic expansion. Thus, globally, the economic recovery remains very fragile (Box 1.3). In fact, risks have even increased recently. In the Reference Case, however, it is assumed that decisive action is taken in a timely manner to make sure the global economy remains on the path of recovery. Notwithstanding the recognition of the fragility of the economy, in the short-term, a major change compared to the WOO 2010 is a more rapid recovery from the Great Recession, with global growth in 2010 now estimated to have been 4.7%, compared to the 3.9% assumed previously. There is even a slightly more optimistic view for global growth in 2011, now assumed to be 3.9%, compared to 3.7% in last year’s WOO. 10 As noted, however, there are significant downside risks. 33 Chapter 1
34 Box 1.3 Economic recovery: sustainable at current rates? The global economic recovery is increasingly showing signs of weakness and it is essential to better understand where the economy might be heading. Two possible developments seem likely from here. The first is that the global economy will be marked by a low and below average trend growth, in combination with high unemployment rates in developed economies and continuing global growth imbalances. And the second is the potential failure of the current support schemes and mechanisms, which would shock the global economy, possibly pushing it back into recession. At the time of publication, this seems the less likely scenario, but it cannot be ruled out. In general, there appear to be three main areas of concern and these will be major determinants impacting the medium-term path of the global economy. The first, and perhaps most pressing issue, is the euro-zone crisis. While Greece’s complete default has so far been avoided, sovereign debt issues remain at the heart of the euro-zone’s worries. A number of other countries, many bigger, have become potential candidates for support, and many peripheral countries still face serious challenges. It appears that the euro-zone has been pushed to the edge in its ability to finance further sovereign debt fall-outs. It seems likely that, if any one of the bigger economies within the euro-zone saw their situation worsen then the repercussions could be severe as the sovereign debt holdings of the European banking sector are considerable. A write-down could push the banking sector into serious difficulties, triggering the need for further emergency measures, which, given the state of EU economies, would be extremely difficult to finance. Research has also shown that a banking crisis scenario often leads to a debt crisis, followed by sovereign defaults. 11 To date, the latter has been avoided through various extraordinary means, but given that the measures pursued have not resolved the sovereign debt issues, the possibility of such a default remains. The second major issue is that of the US economy. While the country’s sovereign debt situation is proving to be a challenge for policymakers, the US’ financial ability and the greater flexibility of the Federal Reserve Board, compared to its European counterpart, appears to offer ways to manage this more easily than in Europe. However, more important to the global economy is the relatively muted recovery in private household demand. Given that US households are responsible for more than one eighth of global GDP, it is easy to appreciate its importance. In addition
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Page 4 and 5: Chapter 1 World oil trends: overvie
Page 6 and 7: Box 1.1 Regulatory reform in the en
Page 8 and 9: commodities, the OTC market also in
Page 10 and 11: IHS CERA upstream capital cost MOVE
Page 14 and 15: to this, there is the dominance of
Page 16 and 17: Although these reduced growth targe
Page 18 and 19: Global and regional population leve
Page 20 and 21: average of 67% of the population in
Page 22 and 23: Table 1.3 Population by urban/rural
Page 24 and 25: Figure 1.8 Real GDP by region in 20
Page 26 and 27: Policies The Reference Case retains
Page 28 and 29: electric vehicles, which focuses on
Page 30 and 31: Box 1.5 Shale gas: recent developme
Page 32 and 33: 40 years. While the early high perf
Page 34 and 35: Box 1.6 After Fukushima: unclear fo
Page 36 and 37: is Japan itself, which has been ask
Page 38 and 39: Figure 1.13 Fossil fuel use per cap
Page 40 and 41: Table 1.6 Medium-term Reference Cas
Page 42 and 43: Table 1.7 World oil demand outlook
Page 44 and 45: low, and well below levels seen in
Page 46 and 47: has also taken into account the pot
Page 48 and 49: stronger than previously expected s
Page 50 and 51: d 0 Conventional Figure 1.22 US & C
Page 52 and 53: Upstream investment Figure 1.25 mb/
Page 54: different picture. By 2035, Annex I
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n (millions) 7,000 84 0 China Brazi
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ion (millions) 7,000 6,000 5,000 4,
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88 Conventional powertrain technolo
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90 acquisition costs, and the lower
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92 Figure 2.9 Increase in oil consu
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94 rose by an average of more than
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96 Table 2.10 Oil demand in rail an
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98 Table 2.13 Oil demand growth in
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100 Table 2.14 Oil demand in the pe
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102 2.5 2.0 10 1.5 81.0 60.5 0 mboe
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104 Figure 2.15 Share of industry i
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106 Figure 2.16 Figure 2.16 Oil use
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108 Table 2.19 Oil demand growth in
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110 from 63% to 10% in Southeast As
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112
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114 In Canada, although the Outlook
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116 Non-OPEC Latin America’s prod
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118 additional supply of 180,000 b/
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120 limiting factor for feasible su
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122 Table 3.4 Medium-term non-OPEC
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124 some deposits will not be suffi
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126 1.8 mb/d in 2010, to 2.7 mb/d i
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128 Of utmost importance, in respec
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130 influences and, therefore, brin
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132 early support given to Brazil
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134 the call on OPEC crude by 2035
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136 us to cooperate to lay the foun
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138 Figure 4.1 Table 4.6 Oil supply
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140 COP-16, held in Cancun at the e
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142 in Article 4, paragraph 8, of t
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144 identifies sustainable long-ter
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146 Beyond the oil sector, there ar
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148 other international research an
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Section One

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