By coincidence, The Economist this week has an
article this week on the same theme as the posting I wrote a couple of
days ago (131. An utterly different post-industrial society). And
it comes to two similar conclusions -- that the post-oil world will
depend on hydrogen, and also that the economic infrastructure will be
much more diversified than now.
The article is adequate discussion from the general politico-strategic
point of view but it's obviously written by someone without scientific
training because there's no discussion of the really significant matter
of the relative costs -- and thus practicalities -- of where the hydrogen
is going to come from! As sources of hydrogen, it mentions fossil fuels
(the very resource it is saying is going to diminish!) and renewables
(exactly what renewables does the article mean?) and "even nuclear
power" (but doesn't mention the cost!). Unfortunately, neither does
it discuss what are the really fascinating implications of a diversified
energy industry. Pity.
Also (though I'm being hypercritical now!), the article spends quite a
bit of time dwelling on the plight of Saudi Arabia, but not a word about
the huge oilfields lying immediately adjacent to it. By these I mean, of
course, the second largest oil and gas fields in the world in the country
which President Bush has just invaded.
On the whole, though, let me give The Economist 7 or 8 marks out
of 10. It's finally catching up on matters which some of us (including
your present scribe) were writing about 30 years ago.
Keith Hudson
<<<<
THE END OF THE OIL AGE
Ways to break the tyranny of oil are coming into view. Governments need
to promote them
The Stone Age did not end for lack of stone, and the Oil Age will end
long before the world runs out of oil. This intriguing prediction is
often heard in energy circles these days. If greens were the only people
to be expressing such thoughts, the notion might be dismissed as Utopian.
However, the quotation is from Sheikh Zaki Yamani, a Saudi Arabian who
served as his country's oil minister three decades ago. His words are
rich in irony. Sheikh Yamani first came to the world's attention during
the Arab oil embargo of the United States, which began three decades ago
this week and whose effects altered the course of modern economic and
political history. Coming from such a source, the prediction, one
assumes, can hardly be a case of wishful thinking.
Yet a generation after the embargo began, the facts seem plain the world
remains addicted to Middle Eastern oil. So why is Sheikh Yamani
predicting the end of the Oil Age? Because he believes that something
fundamental has shifted since that first oil shock and, sadly for
countries like Saudi Arabia, he is quite right. Finally, advances in
technology are beginning to offer a way for economies, especially those
of the developed world, to diversify their supplies of energy and reduce
their demand for petroleum, thus loosening the grip of oil and the
countries that produce it.
Hydrogen fuel cells and other ways of storing and distributing energy are
no longer a distant dream but a foreseeable reality. Switching to these
new methods will not be easy, or all that cheap, especially in transport,
but with the right policies it can be made both possible and economically
advantageous. Unfortunately, many of the rich world's governments and
above all the government of America, the world's biggest oil consumer,
are reluctant to adopt the measures that would speed the day when the
Saudis' worst fears come true.
The $7 trillion heist
If treating the West's addiction to oil will be costly, is it really
worth doing? To be sure. Petro-addiction imposes mighty costs of its own.
First, there is the political risk of relying on the Organisation of
Petroleum Exporting Countries (OPEC). Oil still has a near-monopoly hold
on transport. If the supply is cut off even for a few days, modern
economies come to a halt, as Britain discovered when tax protestors
blockaded some domestic oil depots two years ago. And despite what sound
like large investments in new oil fields in Russia and elsewhere, Saudi
Arabia's share of the world oil market will actually grow over the next
two decades simply because it has such huge reserves of cheap oil.
Geology has granted two-thirds of the world's proven oil reserves to
Saudi Arabia and four of its neighbours. Because of this continuing
concentration of supply, the risk of a disruption to oil flows will
continue to be a threat, and may even rise.
That points to a second sort of cost. According to one American
government estimate, OPEC has managed to transfer a staggering $7
trillion in wealth from American consumers to producers over the past
three decades by keeping the oil price above its true market-clearing
level. That estimate does not include all manner of subsidies doled out
to the fossil-fuel industry, ranging from cheap access to oil on
government land to the ongoing American military presence in the Middle
East.
The final disguised cost of oil is the damage it does to the environment
and human health. Unlike power plants, which are few in number and so
easier to regulate, cars are ubiquitous and much more difficult to
control. The transport sector is a principal source of global emissions
of greenhouse gases.
The only long-term solution to this connected set of problems is to
reduce the world's reliance on oil. Achieving this once seemed
pie-in-the-sky. No longer. Hydrogen fuel cells are at last becoming a
viable alternative. These are big batteries that run cleanly for as long
as hydrogen is supplied, and which might power anything in or around your
home -- notably, your car. Hydrogen is a fuel that, like electricity, can
be made from a variety of sources -- fossil fuels such as coal and
natural gas, renewables, even nuclear power. Every big car maker now has
a fuel-cell programme, and every big oil firm is busy investigating how
best to feed these new cars their hydrogen.
Another alternative likely to become available in a few years is
bioethanol. Many cars (quite a few of them in America) already run on a
mixture of petrol and ethanol. The problem here is cost. At the moment,
the ethanol has to be heavily subsidised. But that might alter when
biotechnology delivers new enzymes that can make ethanol efficiently from
just about any sort of plant material. Then, the only limit will be how
much plant material is available.
All in good time
Such changes will not occur overnight. It will take a decade or two
before either fuel cells or bioethanol make a significant dent in the oil
economy. Still, they represent the first serious challenges to petrol in
a century. If hydrogen were made from renewable energy (or if the carbon
dioxide generated by making it from fossil fuels were sequestered
underground), then the cars and power plants of the future would release
no local pollution or greenhouse gases. Because bioethanol is made from
plants, it merely borrows its carbon from the atmosphere, so cannot add
to global warming. What is more, because hydrogen can be made in a
geographically distributed fashion, by any producer anywhere, no OPEC
cartel or would-be successor to it could ever manipulate the supplies or
the price. There need never be another war over energy.
It all sounds very fine. What then is the best way to speed things up?
Unfortunately, not through the approach currently advocated by President
George Bush and America's Congress, which this week has been haggling
over a new energy bill. America's leaders are still concerning themselves
almost exclusively with increasing the supply of oil, rather than with
curbing the demand for it while increasing the supply of alternatives.
Some encouragement for new technologies is proposed, but it will have
little effect. Bigger subsidies for research are unlikely to spur
innovation in industries with hundreds of billions of dollars in
fossil-fuel assets. The best way to curb the demand for oil and promote
innovation in oil alternatives is to tell the world's energy markets that
the externalities of oil consumption -- security considerations and
environmental issues alike -- really will influence policy from now on.
And the way to do that is to impose a gradually rising gasoline
tax.
By introducing a small but steadily rising tax on petrol, America would
do far more to encourage innovation and improve energy security than all
the drilling in Alaska's wilderness. Crucially, this need not be, and
should not be, a matter of raising taxes in the aggregate. The proceeds
from a gasoline tax ought to be used to finance cuts in other taxesthis,
surely, is the way to present them to a sceptical electorate.
Judging by the debate going on in Washington, a policy of this kind is a
distant prospect. That is a great shame. Still, the pace of innovation
already under way means that Sheikh Yamani's erstwhile colleagues in the
oil cartel might themselves be wise to invest some of their money in the
alternatives. One day, these new energy technologies will toss the OPEC
cartel in the dustbin of history. It cannot happen soon enough.
The Economist -- 23 October 2003
Keith Hudson, Bath, England,
<www.evolutionary-economics.org>,
<www.handlo.com>,
<www.property-portraits.co.uk>
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