Energy Availability and Prices


Driver description
Interactions with the Economy Domain
Interactions within the Social Domain
Interactions with the Environment Domain
Interactions with the Technology Domain
Impacts on Mobility and Transport

Driver description

The Report WEF ‘Global Risks’ is structured as 10-year outlook that examines the 50 prevalent global risks in terms of perceived impact, likelihood and interconnectedness (Ref: CO_0024). The risk of ‘the extreme volatility in energy and agriculture prices’ is associated with ‘severe price fluctuations make critical commodities unaffordable, slow growth, provoke public protest and increase geopolitical tension’. This risk is figured in terms of impact as among the top five economic, environmental, societal and geopolitical risks, whereas its likelihood is considered relative low with a raking of 3.5 over 4.5 and five others economic risks classified as more pressing.

In line with this, the driver is described mainly through the extrapolations from two opposite Scenarios:

  • ‘New Policies Scenario’ at 2035 of the IEA World Energy Outlook (2011) that is based on the assumptions that governments policy commitments on energy and environment are implemented in a cautious manner – even if they are not yet backed up by firm measures and that oil prices rise but are not subjected severe fluctuations (Ref: CO_0152).
  • ‘High Oil Price Scenario’ developed by the Project HOP (2008) for analytical purpose that addresses the impacts of high oil prices in Europeans Economy (Ref: CO_0026).

The driver description is complemented by others studies that foreseen the impacts of high oil prices in particular on the transport sectors.

New Policies Scenario IEA 2011

  • “Despite uncertainty over the prospects for short-term economic growth, demand for energy in the New Policies Scenario grows strongly, increasing by one-third from 2010 to 2035. The assumptions of a global population that increases by 1.7 billion people and 3.5% annual average growth in the global economy generate ever-higher demand for energy services and mobility. A lower rate of global GDP growth in the short-term than assumed in this Outlook would make only a marginal difference to longer-term trends. The dynamics of energy markets are increasingly determined by countries outside the OECD. Non-OECD countries account for 90% of population growth, 70% of the increase in economic output and 90% of energy demand growth over the period from 2010 to 2035.” (Ref: CO_0152)
  • “The age of fossil fuels is far from over, but their dominance declines. Demand for all fuels rises, but the share of fossil fuels in global primary energy consumption falls slightly from 81% in 2010 to 75% in 2035; natural gas is the only fossil fuel to increase its share in the global mix over the period to 2035. In the power sector, renewable energy technologies, led by hydropower and wind, account for half of the new capacity installed to meet growing demand.” (Ref: CO_0152)
  • “Short-term pressures on oil markets may be eased by slower economic growth and by the expected return of Libyan oil to the market, but trends on both the oil demand and supply sides maintain pressure on prices. We assume that the average IEA crude oil import price remains high, approaching $120/barrel (in year-2010 dollars) in 2035 (over $210/barrel in nominal terms) in the New Policies Scenario although, in practice, price volatility is likely to remain.” (Ref: CO_0152)
  • “All of the net increase in oil demand comes from the transport sector in emerging economies, as economic growth pushes up demand for personal mobility and freight. Oil demand (excluding biofuels) rises from 87 million barrels per day (mb/d) in 2010 to 99 mb/dn 2035. The total number of passenger cars doubles to almost 1.7 billion in 2035. Sales in non-OECD markets exceed those in the OECD by 2020, with the centre of gravity of car manufacturing shifting to non-OECD countries before 2015. The rise in oil use comes despite some impressive gains in fuel economy in many regions, notably for passenger vehicles in Europe and for heavy freight in the United States. Alternative vehicle technologies emerge that use oil much more efficiently or not at all, such as electric vehicles, but it takes time for them to become commercially viable and penetrate markets. With limited potential for substitution for oil as a transportation fuel, the concentration of oil demand in the transport sector makes demand less responsive to changes in the oil price (especially where oil products are subsidised).” (Ref: CO_0152)

HOP – High Oil Price Scenario 2008

  • “Amongst the many mechanisms by which the high oil-price would limit GDP growth, we may underline the shift of consumption from non-energy sectors to the energy sector and the reduction in transport activity. The latter is particularly pronounced for passenger transport activity (some -14% points by a doubling of oil price and some -17% points by a tripling), but can also be observed for the transport of goods (some -11%). The high oil price would also reduce the dominance of road transport in the modal split, even if it still remains the most important mode. As a result of the decreasing activity but also due to the introduction of energy efficiency measures, final energy consumption in the energy sector would reduce by around 16% by 2030 (compared to the reference trend) for a doubling of the oil price, and around 26% at a tripling.” (Ref: CO_0026)
  • “The HOP! conclusion is that the expected GDP response to an oil price shock would be less pronounced than that observed for the oil price shocks in the 1970s and 80s. This is due to the changed economic framework and technical progress achieved since then that provide for a large variety of dampening effects on both the oil price and its economic impact. Compared to past oil price outbursts, the oil intensity of the European economy has halved and the service sectors have increased their importance at the expense of the more energy-intensive industrial sectors. A broad variety of improved and alternative energy technologies contributed to this reduction of energy intensity and further technologies become competitive at the oil prices assumed. Thus, the share of renewable energy in primary energy demand would increase considerably. Biofuels, both stemming from first and second generation technologies, exploiting imported and domestic raw resources would experience a significant increase within the transportation sector. They could deliver some 20% of the total transport fuel demand by 2030 as a result of the oil price doubling in 2020, increasing even much further afterwards. Also the composition of the vehicles fleet would change in favour of flexi-fuel vehicles and hydrogen- and gas-fuelled cars.” (Ref:CO_0026)
  • “Yet, all these changes to the energy and transport system require the availability not only of technologies but also of investment. If the level of investments was constrained, the deployment of alternative fuels such as biofuels and the improvement of energy efficiency would rather remain at reference levels. Limited investments would thus significantly restrict the adaptation process of the energy and transport sectors, implying a stronger oil price induced GDP reduction. In the long run this would lead to the most negative scenario – even more negative than the extreme oil price scenarios, in which the energy system responds through extensive adaptation through investments.” (Ref:CO_0026)

Interactions within the Economy Domain

GDP trends

  • “On the most aggregated level, the oil price increase negatively affects GDP growth of EU27. The assumed doubling of the oil price in 2020 would lower Europe's GDP by -1.5% percent compared with the reference scenario. A further oil price increase such as a tripling from reference levels would result in further reductions of GDP to be some -2.2% below the reference by 2020. However, only oil prices in the extreme scenarios would lead close to stagnation of GDP (and only for a limited time period). Decline of GDP would only be expected when two further external factors become true: a world recession and/or a physical shortage of energy supply. The corresponding impacts on employment are roughly three times larger. The doubling of the oil price by 2020 would reduce employment by -5%, a tripling by close to -8%. This would shift the peak of European employment from 2017, as it is expected in the reference scenario, to about 3 to 5 years earlier. The extreme cases would cause dramatic losses of employment of up to -30%, presupposing that no specific counterbalancing policies to stabilize employment are taken or significant wage reductions are expected.” (Ref:CO_0026)


  • “As we experienced in the '70s and early '80s, oil price shocks can lead to rising unemployment.” (Ref: CO_0194)
  • “GDP and employment are negatively affected during the peak period of the oil price increase, employment will be reduced significantly more. The impact after the peak period of oil price increase strongly depends on the mechanisms kicked-off by the price increase. Mitigating the impacts by investing into energy efficiency and alternatives could even lead to a positive economic impact in the medium to long-term, while a world recession or a situation with insufficient energy supply could multiply the negative impacts by factors of 5 to 10.”(Ref: CO_0026)

Foreign trade, globalisation

  • “As we experienced in the '70s and early '80s, oil price shocks can lead (...) to increasing trade deficits and reduced competitiveness.” (Ref: CO_0194)

Interactions with the Social Domain

Income structure and distribution

  • “Costs for energy constitute a larger share of the structural consumption expenditures for low-income households compared to high-income households. Poor households face a treat for utility service cut off if the energy bills are not paid. Such market-based exclusion from energy supply is a comprehensive problem for poor families - and therefore also a threat to the poor older households.” (Ref: CO_0125)

Tourist flows

  • “Research by the UN-WTO (2006) into rising oil prices concludes that in the short term, rising oil prices have not had any noticeable impact on international tourism. However, the longer term consequences have not being examined.” (Ref: CO_4010)

Interactions with the Environment Domain

No particularly relevant interrelationships have been found.

Interactions with the Technology Domain

Traction technologies

  • “We are assuming that by 2020, the cost of oil will be above USD 120 per barrel and that battery charging stations will be in place. There will be a battery cost reduction of more than 30 % compared to today. All this will boost the electrification of transportation. Hybrid cars will have become the basic technology in passenger cars. From 2020 on, the electric vehicle will take over a major role in passenger car transportation; it could dominate the market from some point between 2020 and 2030.” (Ref: CO_0284)

Energy efficiency

  • “In response to rising retail fuel prices (e.g. a 50% jump in 1979), travelers reduced other costs of transport, for example by demanding less expensive (and more fuel efficient) new vehicles.” (Ref: CO_0001)

Impacts on Mobility and Transport

New Policies Scenario IEA 2011

  • “Demand for mobility is strongly correlated with incomes and fuel prices. So as incomes rise – especially in the emerging economies – the size of the global car fleet will inevitably rise in the long term. However, vehicle usage patterns are also affected by incomes and prices. A rise in fuel prices (whether caused by higher prices on international markets or a rise in domestic prices) or a drop in incomes (such as during the global financial crisis) can lead to short-term changes in behaviour. But vehicle-miles travelled usually tend to rebound as consumers become accustomed to the new level of price or as the economy recovers.” (Ref: CO_0152)
  • “Of the projected increase in transport oil demand between 2010 and 2035, 37% comes from road freight traffic, 21% from PLDVs, 18% from international bunkers, 7% from aviation and the remaining 17% from other modes. International aviation and marine bunkers, as well as domestic aviation and navigation, grow with increasing GDP, but the growth is moderated by fuel economy targets recently announced by the International Maritime Organization for shipping and by energy efficiency measures both in aircraft technology and flight logistics.” (Ref: CO_0152)
  • “Road transport is expected to continue to dominate total oil demand in the transportation sector. In the New Policies Scenario, road transport is responsible for about 75% of global transport oil demand by 2035, down only slightly from 77% in 2010. Oil demand for road freight grows fastest, by 1.7% per year on average, despite significant fuel-efficiency gains, especially in the United States where recent government proposals for heavy-duty vehicles aim at improving fuel efficiency between 10% and 17% through to 2018.” (Ref: CO_0152)
  • “Passenger light-duty vehicles (PLDVs) remain the single largest component of transport oil consumption, though their share shrinks from about 45% today to 39% by 2035.” (Ref: CO_0152)
  • “The increase in demand from road freight traffic comes entirely from non-OECD countries, offsetting a decline in OECD countries resulting from efficiency gains and fuel switching. Road-freight traffic is strongly correlated with economic growth, as increased levels of consumption lead to greater movement of goods. In non-OECD countries, road-freight tonne-kilometres increase by 3.7% annually, slightly more than the resulting oil demand, due to efficiency improvements. Although the tonne-kilometres operated by trucks and lorries grow by 0.5% per year on average until 2035 in the increasingly service-oriented OECD countries, the oil needed to fuel this growth drops in the New Policies Scenario as a result of efficiency improvements.” (Ref: CO_0152)

HOP – High Oil Price Scenario 2008

  • “Also substitutes for the various oil derivates would become more competitive, thus experiencing an increased deployment. For example, biofuels would replace some fossil based petrol and diesel in the transport sector, households and industry may shift from the use of oil to electricity, which is primarily produced from non-oil carriers. However, as a general principle high oil prices would also push the prices of oil substitutes upwards, depending on the technology (e.g. for biofuels energy costs account for up to 15%). Also the prices of natural gas would experience an increase, leading to a rise in the use of coal, renewable energies and nuclear power in the power sector. In return, the higher demand for those energy sources would drive up their prices.”(Ref: CO_0026)
  • “Even under the assumption of the required investments becoming available, there will be a delay between the oil price shock and the responses shown above, unless preventive action had been taken. The installation of new capacities in the upstream sector can reach some five to eight years. Production of biofuels could not be increased significantly in some weeks or months. Even if large amount of hydrogen could be produced, the development of the distribution infrastructure will take some time. Planning procedures on the construction of new nuclear plants could take a decade even if nuclear energy would become relatively cost competitive.”(Ref: CO_0026)
  • “A higher oil price leads to an increase in the costs of travel and transport of goods. As for all other goods and services, transport demand is reduced, both for passenger and freight (less trips, lower distances). The cost of public transport modes would comparatively increase less than private modes. Therefore, some modal shift is expected favouring public transport and less energy-intensive modes. The rapidly growing trend for air transportation could be stopped or slowed down considerably. Motorbikes and bikes could also gain market share. On the freight modes side, trucks cost would be increased substantially. As the road haulage market is a very competitive one, profits are very low so there is no room to absorb the increment of fuel cost, which would be probably transferred almost entirely to the user tariffs, so alternative modes (where energy costs are less relevant) become more competitive.” (Ref:CO_0026)
  • “The reduction of personal mobility would be realised both in terms of a lower number of motorised trips per person and of shorter distances per trip. Leisure trips would be at the top of the list of the avoided trips, especially relatively long trips in the week-end. Shortening travel distances would also be a reaction to higher transport costs. Concentrating mobility on unavoidable trips (working, etc.) and reducing travel distances could have a large impact especially on air demand whose massive rise occurred in the last years is mainly made of generated traffic caused by the significant fall of air fares. When high oil prices made low cost flights commercially unviable, at least part of this new demand would disappear.” (Ref: CO_0026)
  • “While personal mobility could be at least partially reduced even in the short terms in response to higher transport costs, the impact on mobility of goods is more questionable. The transport of goods is just a segment of a more complex productive and logistics chain, where the relevant variable is total cost. Currently, transport costs often amount to a very low share of total production costs or goods price (see COMPETE, 2006). This is true on the large scale as well as on the medium and short scale, so in the end, the higher transport costs would probably impact on freight transport much less than on personal mobility, at least on the shorter terms.”

More scenarios

  • “Energy consumers in the transport sector also respond to higher oil prices mainly through lowering their transport activity and shifts towards less energy intensive transport modes. These changes take place despite the fact that the high taxes on transport fuels greatly dampen the impact of further changes in international fuel prices. As a result energy demand in the transport sector in the “Medium gas and soaring oil prices” case is projected to be -1.4% lower from Baseline levels in 2010 and -2.4% lower in 2030. Furthermore, higher oil prices lead to some acceleration in the share of biofuels in gasoline and diesel consumption. The share of biofuels is projected to reach 4.1% in 2010 (compared to 3.9% under Baseline assumptions), 8.3% in 2020 (6.9% in Baseline) and 10.7% in 2030 (8.3% in Baseline). The accelerated penetration of biofuels in transport impacts on the evolution of CO2 emissions in the sector, which are projected to decrease at rates well above those of energy demand over the projection period (reaching -4.7% from Baseline levels in 2030).” (Ref_CO_1034)
  • “The analysis of transportation activity by transport mode and the projections for the EC DGTREN Baseline scenario (Trends to 2030) focuses on energy consumption in the transport sector, which accounted for 31% of total final energy consumption in 2005, up from 26% in 1990. This increasing share of transport in total energy consumption is projected to persist in the EC DGTREN Baseline scenario, achieving a share of 33% in the year 2030.” (Ref: CO_5048)
  • “The expectations are that crude oil based fuels will continue being the most important source for satisfying the energy demand in the transport sector up to 2030.” (Ref: CO_5048)
  • “(...) road transport is the overwhelmingly most important energy user, it is important to examine the expected development in energy efficiency in this transport segment.” (Ref: CO_5048)
  • “It is highly uncertain how societies will respond to the exploding demand yet stagnating supply of energy, especially oil. But it is clear the energy mix that’s in place in 2040 will determine what types of mobility systems we have in our cities. For example, if there is a large-scale shift to renewable energy, this could favour electric, solar or hydrogen-powered vehicles. Or if energy is expensive and inaccessible to most, this could favour mass transit over personal motorised transport.” (Ref: CO_5018)
  • “Rising energy prices will probably cause only modest mileage reductions during the foreseeable future.(...). As real fuel prices increase during the next few decades, motorists will probably trade in their gas guzzlers for fuel efficient vehicles and only reduce their per capita vehicle mileage by a modest amount.” (Ref: CO_5047)
  • “(...) the transport sector’s demand for oil is less price sensitive than any other part of the economy. This is in part because demand for transport services is relatively insensitive to price and in part because substitutes for oil in road transport are currently far from cost-effective.” (Ref: CO_5048)
  • “In rail transport the substitution from diesel to electricity will continue.” (Ref: CO_5048)
  • “Energy consumption by aviation has grown by 4.6% per year in the period 1990 to 2000 and by 1.9% per year between 2000 and 2005. Transportation activity handled by aviation, measured in passenger-km, grew faster during the same period. The average Energy intensity of flights, measured in toe per passenger-km, decreased 16 % during 1990-2005 due to improved design of engines and aircrafts.” (Ref: CO_5048)
  • “The costs involved and hence the prices charged for the transportation of people and goods depend on fluctuations in energy prices.” (Ref: CO_6006)