1. Some Observations on the World Energy Scene

The difficulties of forecasting the behaviour of world energy and economic systems have led to persistent major revisions of energy forecasts during the last decade. However in the energy business where projects are highly capital intensive and lead times are long it is necessary to take a view of the future. The starting point for any energy forecast must be the economic environment and the structural changes in the world economy that may occur over the period considered - in the USA, for example, over the last decade they have led to a fall of 20% in the amount of primary energy needed to produce a unit of real income.

The consequences of these structural changes are exemplified by the growth in levels of conservation arising from the increase in absolute energy prices over the last decade. This trend towards greater efficiency can be prices over the last decade. This trend towards greater efficiency can be expected to continue. In Europe the increase in fuel prices led to significant falls in the amount of energy used for space heating; in Denmark energy use per dwelling fell by a third during the decade. A similarly large fall occurred in the US. All this took place through the installation of better insulation, double glazing and the reduction of waste; but the living standards and levels of comfort improved.

The forecast of higher prices in the long run coupled with an expected high level of technological advance suggests that structural change will continue, energy use will be less intensive and the ratio of energy to GDP will continue to fall. But there will be regional variations. As energy intensive industries are switched to the less developed countries where low cost hydrocarbon reserves exist the fall in the energy/GDP ratio will be more pronounced in the industrialized countries particularly the USA. The ratio for the less developed countries, by contrast, will not fall (Figure 1).

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