A report (“International Energy Outlook 2008”) released this week by the Energy Information Agency (EIA) raises some provocative questions regarding the world’s energy future.  With global population, currently 6.7 billion, projected to reach 8.3 billion by 2030, how will the world’s demand for energy be met?  And at what price?

The EIA's report outlines two scenarios.  Under the “reference case” scenario, where current laws and policies remain unchanged, world energy consumption “driven by robust economic growth and expanding populations in the world’s developing countries.” is projected to grow by 50 percent between 2005 and 2030.

But the reference case assumes that world oil prices will decline to around $70 per barrel in 2015, then rise steadily to $113 per barrel in 2030 ($70 per barrel in inflation-adjusted 2006 dollars).

The report, however, includes an alternative “high price case,” in which world oil prices in 2030—at $186 per barrel in nominal terms—are nearly 65 percent higher than projected in the reference case.

So which price scenario is more likely? The EIA concedes “that world oil prices are on a path that more closely resembles the projection in the high price case than in the reference case.” 

Under the “high price” scenario, world consumption of oil and other liquid fuels “totals only 99.3 million barrels per day in 2030, 13 million barrels per day lower than in the reference case.”

This revised “high price” estimate represents a major revision in EIA thinking. Just six months ago, the EIA was projecting that global oil production would rise to 113 million barrels a day by 2030.  As current production levels are somewhere between 85 and 87 million barrels a day, acceptance of the “high price case” suggests that projected increases in liquid fuel production could be nearly 50 percent lower than anticipated just last year.

The EIA report says that the “composition of supply differs substantially between the reference and high price cases.”  Higher oil prices, in other words, would spur development of bio-fuels and other energy alternatives.

So how would the “high price” scenario affect total energy consumption?  Given the wide disparity in oil prices between the “reference case” and the “high price” scenario, one might expect that the higher prices would boost energy conservation and sharply reduce total energy consumption.  Not according to this report. 

In the “reference case,” the world’s total energy consumption rises at an annual rate of 1.6 percent a year between 2005 and 2030. In the “high price” scenario, total energy consumption still rises at 1.5 percent a year. 

The EIA report appears to indicate that even in the developing world, higher oil prices will not dampen demand for energy.  In the “high price” scenario total energy consumption in Africa increases at an annual rate of 1.9 percent a year between 2005 and 2030, only slightly lower than the rate of 2.0 percent a year in the “reference case” scenario.  In Central and South America (excluding Brazil), total energy consumption under the “high price” energy scenario rises at 1.5 percent a year, only slightly less than the 1.7 percent a year increase that occurs in the “reference case.”

It would be comforting to believe that world energy needs—particularly the needs of the developing world—will be met whether or not the price of oil goes to $186 a barrel by 2030.  But if global oil production is going to peak at less than 100 million barrels—and a growing number of experts believe that it will peak well below that level—the impact on developing world could be severe.  Higher oil prices will translate into higher prices for other forms of energy, including coal and natural gas.  In the developed world, higher energy prices means it costs more to drive your car and air condition your home.  In much of the developing world, energy needs are more basic. Higher energy prices mean that it costs more to fertilize fields and harvest and transport crops to market. 

How rising energy prices will affect poor countries with rapidly growing populations is a matter of enormous concern.  This is an area that needs further research. The EIA report may not be the last word.

With the flooding in the Midwest and corn and oil prices soaring to record levels, it would be easy to overlook the issue of water shortages. Easy, perhaps, but short-sighted.  Of all the population-related challenges that policymakers face in the 21st Century, water is perhaps the greatest.

Warning of a global water crisis, Peter Brabeck-Letmathe, the chairman of Nestle SA, the world largest food country, told the World Economic Forum on East Asia on Monday that, “We will run out of water before we run out of oil.” He noted that, “three parts of the world no longer send water into the sea.”  Yesterday, the National Oceanic and Atmospheric Administration released a report on climate change that there is growing scientific evidence suggesting that droughts and excessive heat in the U.S. and the world "are likely to become more commonplace as humans continue to increase the atmospheric concentrations of heat-trapping greenhouse gases."

Seven hundred million people today live in countries experiencing water stress or scarcity.  By 2035, the World Bank projects that 3 billion people, more than one third of the world’s population, will be affected by severe water stress.  With many countries sharing water supplies, experts warn that disputes over water in the Middle East and elsewhere could lead to international conflict. 

The FAO reports that most countries in the Near East and North Africa suffer from acute water scarcity.  So do countries like China, India, Mexico, Pakistan, and South Africa. Population growth, urbanization, and climate change pose an enormous challenge to these areas and other. According to the FAO, one in five people in the developing world presently lacks access to the daily twenty litres of water deemed necessary for human survival. 

Water is particularly is particularly critical to food production (and production of biofuels).  Global population is expected to reach 8.1 billion by 2030. If the farmers of the world needs to produce 50% more food by 2030 as the U.N. Secretary General recently indicated, the FAO indicates that 14 percent more freshwater will need to be withdrawn for agricultural purposes in the next 30 years.

But under a “business as usual” scenario the International Food Policy Research Institute projects, by 2025, that: 

• Water scarcity will cause annual global losses of 350 million metric tons of food production-slightly more than the entire current U.S. grain crop.
• Consumption of water for all nonirrigation uses will rise dramatically, by 62 percent.
• Household water use will increase by 71 percent, of which more than 90 percent will be in developing countries, but many households will remain unconnected to piped water.
• Industrial water demand will increase significantly in developing countries and, by 2025, a major shift will occur: industrial water demand in the developing world will exceed the demand in developed countries.
• Water scarcity will cause substantial shifts in where the world's food is grown. Developing countries will dramatically increase their reliance on food imports. In sub-Saharan Africa, grain imports will more than triple. Poor countries, unable to finance imports, will experience increased hunger and malnutrition.

The U.S. is also impacted by water shortages.  Indeed, the fastest growing regions of the United States (the West, the Southwest, and the Southeast) are all struggling with water problems. 

Earlier this month, Gov. Schwarzenegger declared an official statewide drought, the first such declaration since 1991.  A recent New York Times story (“Water-Starved California Slows”) reports that building projects in California are being curtailed for the first time because developers are unable, as required by state law, to secure a 20-year water supply as a condition of building. The article reports that:

An eight-year drought in the Colorado River basin has greatly impinged on water supply to Southern California. Of the roughly 1.25 million acre-feet of water that the region normally imports from that river toward the 4.5 million acre-feet it uses each year, 500,000 has been lost to drought, said Jeff Kightlinger, the general manager of the Metropolitan Water District of Southern California.

California’s population, currently 37 million, is projected to grow to 45 million by 2020 and to 60 million by 2050, but water restrictions could make that more difficult.  It could also make it more challenging for farmers. California’s breadbasket, the Central Valley, is also the fastest growing part of the state.  Concerns are mounting that farmers in the Central Valley will have to curtail irrigation (and production) due to the drought and increased demands of residential water users.

Food and fuel prices may grab all the headlines, but policymakers—here and abroad—should not take their eyes off the water problem.  Next month, the Population Resource Center will be hosting a policy roundtable on Capitol Hill looking at how projected population growth rates in the West and the Southwest are posing a growing challenge to water resource managers in the region.

At a time when concerns are mounting regarding food, fuel and the economy, a little good news is always welcome.  The CDC’s National Center for Health Statistics (NCHS) gave us some of welcome news this past week.  NCHS released preliminary data on deaths for 2006 indicating that age-adjusted death rates in the United States fell significantly between 2005 and 2006, while life expectancy hit another record high.  NCHS reported that:  

The 2006 age-adjusted death rate fell to 776.4 deaths per 100,000 population from 799 deaths per 100,000 in 2005. In addition, death rates for 8 of the 10 leading causes of death in the United States all dropped significantly in 2006, including a very sharp drop in mortality from influenza and pneumonia. 

The report also found:

Life expectancy at birth hit a new record high in 2006 of 78.1 years, a 0.3 increase from 2005. Record high life expectancy was recorded for both white males and black males (76 years and 70 years, respectively) as well as for white females and black females (81 years and 76.9 years). The preliminary number of deaths in the United States in 2006 was 2,425,900, a 22,117 decrease from the 2005 total. With a rapidly growing older population, declines in the number of deaths (as opposed to death rates) are unusual, and the 2006 decline is likely the result of more mild influenza mortality in 2006 compared with 2005. 

It appears that progress is being made on a number of health fronts:  

Between 2005 and 2006, the largest decline in age-adjusted death rates occurred for influenza and pneumonia, with a 12.8 percent decline. Other declines were observed for chronic lower respiratory diseases (6.5 percent), stroke (6.4 percent), heart disease (5.5 percent), diabetes (5.3 percent), hypertension (5 percent), chronic liver disease and cirrhosis (3.3 percent), suicide (2.8 percent), septicemia or blood poisoning (2.7 percent), cancer (1.6 percent) and accidents (1.5 percent). There were an estimated 12,045 deaths from HIV/AIDS in 2006, and age-adjusted death rates from the disease declined 4.8% from 2005. 

Despite the progress in these areas, the U.S. still ranks 29th in life expectancy among the United Nations' member nations.   Nations, like Japan, Sweden, Australia and Switzerland still lead us by 3-4 years, and most countries in Europe lead us by 2-3 years.  The U.S. is also plagued by large disparities in life expectancy.  As reported in an earlier PRC blog (April 30, 2008), two recent studies reveal disturbing disparities between the life expectancy whites and blacks.  And the life expectancy of lower socio-economic groups still lags far behind higher socio-economic groups.  One study also reported that not all Americans are living longer; life expectancy in some areas of the country is actually declining.

The NCHS report also showed that the  “infant mortality rate for 2006 was 6.7 infant deaths per 1,000 live births, a 2.3 percent decline from the 2005 rate of 6.9.” But despite the progress in reducing infant mortality, a less encouraging report on children was issued this past week by the Annie E. Casey Foundation.  Its Kids Count report found that in 2005, 8.2 percent of U.S. babies were born at low birth weight, the lowest level since 1968.   In various press reports, Laura Beavers, coordinator of the Kids Count project, is quoted as saying the increase in low birth weights was due, in part, to a rise in multiple births and a growing number of premature births.  The foundation report also found significant health disparities: the increase in low-weight birth was significantly higher for blacks (13.6%) than for white (7.3%) or Hispanics (6.9%). 

The Kids Count report, which looked at ten broad indicators of child well-being [child death rate, teen death rate, teen birthrate, high school dropout rate, teens not in school and not working, infant mortality rate, low-birth weight babies, children living with jobless or underemployed parents, children in poverty, and children in single-parent families], gave a somewhat mixed review of the overall picture for children.  The report noted that:  

Some dimensions of well-being improved, some worsened, and some showed little change. However, the overriding picture that these 10 indicators present is one of little change since 2000.  At the national level, 5 of the 10 indicators of child well-being showed that conditions improved since 2000, while child well-being worsened on 4 indicators and stayed the same on 1 indicator. It should be noted, however, that many of these changes were very small and may be random fluctuations in the data. The three areas where measures have worsened (in addition to low-birth weight babies) are: children living in families where no parent has full time year round employment, children in poverty, and children in single parent families.  

The Annie E. Casey Foundation’s report emphasized that progress on improving child well-being has stalled in recent years:  

The portrait of change in child well-being since 2000 stands in stark contrast to the period just prior to 2000. Between 1996 and 2000, 8 of the 10 key indicators used in KIDS COUNT improved, and several improved dramatically. The improvement was experienced by every major racial group and in nearly all of the states.

Pre- and post-2000 trends are clearly illustrated by changes in the rate of child poverty since the mid-1990s. Between 1994 and 2000, the child poverty rate fell by 30 percent. This was the largest decrease in child poverty since the 1960s. Since 2000, however, improvements have stalled. In fact, the child poverty rate has increased by 6 percent, meaning 1 million more children in poverty in 2006 than in 2000.

While the financing of health care is likely to be a hotly debated issue in the upcoming president, too little attention is likely to be paid to one of the greatest challenges we face related to an aging, still growing America: a shortage of trained medical personnel.

Two months ago, the Institute of Medicine released a report (“Retooling for an Aging America: Building the Health Care Workforce”) that raised alarm about a growing shortage of doctors and nurses certified in geriatrics. At present, there are only 7,100 geriatricians (physicians) in the United States - one per every 2,500 older Americans - and less than 1 percent of registered nurses are certified in geriatrics.  The study, which was conducted by IOM’s ad hoc Committee on the Future Health Care Workforce for Older Americans, looked at the health care needs of Americans over 65 years of age. 

The IOM report notes that:

The number of older adults in the United States will almost double between 2005 and 2030, and the nation is not prepared to meet their social and health care needs. The baby boomer generation starts to turn 65 in 2011, which will create multiple challenges for the health care system. For one, the majority of older adults suffer from at least one chronic condition and rely on health care services far more than other segments of the population. Additionally, this generation of older adults will be the most diverse the nation has ever seen….. Another problem is the dramatic shortage of all types of health care workers, especially those in long-term care settings. Finally, the overall health care workforce is inadequately trained to care for older adults.

The report's conclusion warns that:

The impending crisis, which has been foreseen for decades, is now upon us.  The nation needs to act now to prepare the health care workforce to meet the care needs of older adults.  If current reimbursement policies and workforce trends continue, the nation will continue to fail to ensure that every older American is able to receive high-quality care.  The dramatically rising number of older Americans, along with changes in their demographic characteristics, health needs, and settings of care will necessitate transformations related to the education, training, recruitment, and retention of the health care workforce serving older adults.

But it’s not just the lack of geriatricians and nurses certified in geriatrics that should concern policymakers.  Many of the states that are ‘aging’ rapidly are also growing rapidly.  For example, the population of the country’s most populous state, California, is projected to grow from 33.9 million in 2000 to 46.4 million by 2030.  During that same time period, the percentage of Californians aged 65 and over is expected to increase from 10 percent to 17.5 percent.  That means that the number of Californians between 2000 and 2030 will increase by just over one-third and the number of Californians over the age of 65 will jump by nearly two-thirds.

States that are aging and growing face a double challenge. Arizona, the second fastest growing state in 2007, is another one of those ‘aging and growing’ states.  A study just completed by the Arizona Healthcare Workforce Data Center concluded that Arizona will need an additional 49,000 registered nurses over the next nine years to keep pace with Arizona's projected population growth.  And Arizona, the report indicates, already has a shortage of registered nurses, just 681 registered nurses per 100,000 people compared with the national average of 825 registered nurses per 100,000.

The problem in Arizona is not necessarily a lack of people interested in nursing; it’s a lack of teachers and classroom space according to a story that appear in the Arizona Republic.  And Arizona is not alone in this challenge.

The new IOM report indicates that by 2030 America will need an additional 3.5 million health care providers just to “maintain the current ratio of providers to the total poplation.”  That number is a very conservative estimate. As the IOM report stresses, that number does not take into account that older Americans require more health care services and that, as America ages, the ratio of providers to the total population should rise and so should the ratio of geriatricians to other health care specialties.

As important as it is to provide health care coverage to the more than 40 million Americans who lack health insurance coverage, let’s hope that policymakers at all levels will also give more attention to the future of America’s healthcare workforce.

Last week, on the eve of this week's high-level conference on world food security in Rome, the UN's Food and Agriculture Organization (FAO) and the Organization of Economic Cooperation and Development released a report (Agricultural Outlook 2008-2017) on the food crisis that concluded that grain prices may recede from their record highs, but warned that there are "...permanent factors underpinning prices that will work to keep them at higher average levels than in the past."

One of those "permanent factors" is population. The report noted that:

Population dynamics are important determinants of the future global economic environment, directly affecting demand for agricultural commodities. Population growth over the next decade will decline relative to the last 10 years to an average of 1.1% annually to reach approximately 7.4 billion in 2017. The fastest population growth is expected in Africa (annual average above 2%), whereas in Europe, population is expected to essentially stabilise over the coming decade.

Population growth is most pronounced in what the FAO classifies as the Low-Income Food-Deficit Countries (LIFDCs). The danger, of course, is that the rapidly growing LIFDCs will not be able to feed their populations if food prices remain high. In the past year, food riots have broken out in more than a dozen LIFDCs and more riots are anticipated unless grain prices retreat from their record highs.

Last week's FAO/OECD forecast predicted that food prices:

....over the medium term will average substantially above the levels that prevailed in the past 10 years. When the average for 2008 to 2017 is compared with that over 1998 to 2007, beef and pork prices may be some 20% higher; raw and white sugar around 30%; wheat, maize and skim milk powder 40 to 60%; butter and oilseeds more than 60% and vegetable oils over 80%. Over the Outlook period, prices will resume their decline in real terms, albeit at a slower rate. However, the impact of various supply and demand factors on prices will differ across commodities.

....prices may also be more volatile than in the past: stock levels are not expected to be replenished substantially over the Outlook; demand is becoming less sensitive to price changes at the farm level as the commodity share in the final food bill falls and as industrial demand grows; weather conditions and agricultural product supply may become more variable with climate change; and speculative non-commercial investment funds enter or leave agricultural futures markets as profit opportunities dictate.

As sobering at that assessment is, it assumes that the price of oil will fall substantially in the years ahead:

The world oil price assumption underlying this year’s Agricultural Outlook is based on that published in the OECD Economic Outlook n° 82 (December 2007). It assumes prices to slowly increase over the outlook period from USD 90 per barrel in 2008 to USD 104 per barrel by 2017.

In light of the recent spike in oil prices, how realistic is that December 2007 forecast? Long-term futures contracts for delivery oil in 2015 are presently running at about $140 per barrel, substantially above the assumption used in last week's FAO/OECD report. An analyst for Goldman Sachs said last week that oil prices could average $200 a barrel next year. Higher energy prices will translate into higher than anticipated prices for fertilizer and will, likewise, boost the cost of cultivating and transporting crops. Higher energy prices will also boost the growing demand for biofuels and lead to further diversion of croplands to fuel production.

For the foreseeable future, it appears that global food security may be less than secure. Let's see what comes out of the food summit that convened today in Rome.

For decades now, economists and demographers have studied the economic boost (often called the “demographic dividend”) that can occur when a nation’s fertility rate falls and the youth dependency rate declines. 

The term “demographic dividend” is never used, but the final report ("The Growth Report: Strategies for Sustained Growth and Inclusive Development") of the Commission on Growth and Development gives us another perspective on the relationship between population change and economic development.

The Commission, an independent group of policy makers, business leaders and scholars, supported by the World Bank, the Hewlett Foundation, and the governments of Australia, Netherlands, Sweden, and the United Kingdom, released its report in late May.

The Commission examined 13 economies that since 1950 have grown at an average rate of seven percent a year or more for 25 years or longer.  At that rate, an economy nearly doubles in size every decade.   The 13 “economic miracles” were: Botswana, Brazil, China, Hong Kong (China), Indonesia, Japan, the Republic of Korea, Malaysia, Malta, Oman, Singapore, Taiwan (China), and Thailand.  The report identified several factors that accounted for these strong economic performances, including high rates of savings and investments and reliance on market mechanisms. 

While the report did not highlight possible demographic factors, all of these countries underwent a significant demographic transition in the last half century.  The total fertility rate in all but two of the countries (Botswana and Oman) is below 3.0 today  Most of them have a total fertility rate today that is below the “replacement rate” needed to maintain population growth.

The Commission did not directly address the possible role of family planning in helping to achieve sustained economic growth, but the report did talk about birth rates and the importance of educating girls:

The education of girls provides one strong test of a government’s commitment to equality of opportunity. Many formidable obstacles stop girls completing their schooling: family financial pressure, lack of safety, even things as basic as inadequate toilet facilities. But if these obstacles can be overcome, the payoff is very high. Educated women have fewer, healthier children, and they have them at older ages. Their children are then more successful in school, largely because they benefit from their mother’s education. Educating girls and integrating them into the labor force is thus one way to break an intergenerational cycle of poverty.

After evaluating these and other reasons for the success of these 13 “economic miracles,” the Commission looked at future economic growth prospects and again touched on demographic factors. 

With respect to the growth prospects of economies with aging populations, the Commission offered a cautiously upbeat appraisal:

Aging societies account for about 70 percent of global GDP, large enough to be significant. As their populations gray, must their economic growth slow? According to simple arithmetic, if the number of working-age adults stagnates or falls, and the number of retirees increases, this must surely squeeze income per head. There are fewer people to earn the income, but no fewer people to divide it among.

But this gloomy projection assumes that the definition of “working-age” remains the same as it does today. That is unlikely to be true. In many countries and regions (including most of Europe, North America, Japan, and China), the graying of the population threatens the solvency of the country’s pension arrangements. As a result, reforms are needed to extend the working life in these countries, or to give people a different set of choices with respect to retirement, income, and consumption before and after retirement.

The current fixed retirement ages cannot survive. Thus the reforms needed to restore the fiscal viability of many national pension systems will also change the length and pattern of working lives. If these reforms are undertaken gradually, as we expect, then the research suggests there is no compelling reason to expect a major slowdown in global growth.

The Commission, however, raised a few warning flags about the growth prospects of countries with younger demographic profiles: 

Aging is mostly a problem for the richer countries but does include China. Many of the world’s least developed countries have the opposite problem. Populations are young, and in countries ravaged by diseases like HIV/AIDs, the “anti-aging effect” is dramatic.

As a result, some countries have millions of young people leaving school and entering job markets that cannot absorb them. Moreover, as new entrants to the labor force, youth are often at a disadvantage to more experienced workers. The result is a worrying youth unemployment problem. It is a predicament that goes well beyond economics, posing a moral challenge and a security risk. And it is very widespread.

In some areas, even very high growth rates will not be quick enough to absorb the forecast labor supply. The numbers are striking. From now until 2050, the world is projected to add 3 billion people. Only 100 million will be in rich countries. One billion will be in fast-developing countries, like India and China. The remainder, which is to say two-thirds of the world’s population increase, will be added in countries that do not yet have a solid track record of growth. Thus, the supply of labor is not where the jobs are being created.

This demographic problem cannot be solved by individual countries alone. The solution will have to span national boundaries. For many countries, it is clear to us, migration for purposes of work is the only potential solution. Workers will have to move from countries where labor is abundant to countries where it is scarce. Migration for work needs international supervision to prevent abuses in the treatment of mobile labor.

Unfortunately, many of the papers written for the Commission were completed before the latest round of commodity price shocks. The report, however, did allude to the challenge posed by rising commodity prices:

One big question remains. Do these rising prices mark the beginning of a period in which natural resources, broadly defined, impose new limits on global growth? It is possible. Growth, both globally and in developing countries, may be somewhat slower than the pace set in the recent past. But it is not possible to know in advance how tight the new limits might be.

That is a big question, too big in fact to receive so little attention in this report.  The 13 economic success stories profiled by the Commission’s report occurred, for the most part, during a time of rapidly expanding oil production and sharp increases in agricultural production.  If global oil output stagnates and/or global food production fails to keep up with the world’s growing appetite for food, “economic miracles” may be a lot harder to come by in the future.