Within the next weeks, the British government is expected to unveil its strategic energy plan for the next quarter of a century. According to those familiar with the draft, the plan is build around a single motto: energy security.
The United Kingdom is not the first major industrial power to put energy security top of its national agenda. In the United States, President George W Bush made that a priority of is administration over two years ago. Since then France, Germany and Japan have also begun to rethink their long-term energy strategies. In every case, the strategy adopted is aimed at reducing dependence on imported oil and natural gas by developing alternative sources of energy, notably nuclear.
It was no accident that the latest G-8 summit, hosted by Russia in Saint Petersburg, was built around a discussion about energy security, with President Vladimir Putin casting himself in the role of a reliable supplier in an uncertain global energy market.
Also present at Saint Petersburg was Brazil’s President Igancio Lula da Silva with proposals to tell his Latin American giant of a country the principal exporter of bio-energy, the environmentally friendly alternative to fossil fuels.
The quest for alternative sources of energy is not limited to governments. Almost all the major oil companies have set up new units to look for non-fossil fuels while several car manufacturers plan to invest in developing engines that use alternative sources of energy. (This month Ford announced plans to £1 billion on such research in Britain.)
Until even a couple of years ago, experts believed that oil would remain the principal form of energy at least until the middle of the current century. Now, however, many experts envisage a shorter lifespan. One minister from a major Arab producer told me recently that he now believes oil would lose its current dominant position within the next three decades at most.
Why are those who once so eagerly sought oil now seek to flee from it as fast as they can?
The obvious answer may be the sudden rise in oil prices over the past tree years.
The money paid by oil importing nations to exporters over the past decade looks like the largest transfer of wealth from one part of the world to another since the Spanish looted South America’s gold and silver. That answer, however, may be misleading. For even at $75 per barrel, crude oil today is cheaper than in the mid-1970s in constant dollars. In fact, compared to recent increases in prices of raw materials across the board, the rise in oil prices falls below the median.
The attempt to move away from oil may be motivated by other considerations. Chief among these is the realisation that with the arrival of hundreds of millions of new consumers in the energy market- especially in China and India- there will simply not be enough oil to go around. By mid-century, China and India may well have a combined population of almost five billion. Even if they were to stabilise per capita oil consumption at current levels , say in Belgium, there would not be enough known oil reserves in the world to satisfy their needs for more than a couple of decades.
All that means that the era of easy access to oil may be over. Those who want oil will soon have to fight for it. The demagogic slogan “no blood for oil” is already popular in the West, although, as yet, it there is no war for oil.
Another consideration for the quest to move away from oil is the growing popularity of doomsday scenarios based on real or imagined climate change. Even the Bush administration, regarded as the last bastion of sanity against climate doomsters, now admits that global warming may be something more than a figment of scientific imagination, after all.
Many consumers, especially in the major Western markets, are also concerned about some of the regimes that control the world’s oil resources. The image of President Mahmoud Ahmadinejad of the Islamic Republic threatening a war of civilisations may appear as mildly amusing to most Iranians. To most Westerners, however, it is a disturbing image. Venezuela’s populist caudillo Hugo Chavez may charm Latin Americans with his mock Bolivarian rhetoric. However, he also frightens oil importers in the West. The fact that a good part of the world’s oil reserves is in some of the most unstable and strife-ridden corners of the globe is not reassuring.
Finally, there is the popular assumption in some importing countries that the money spent on oil supports undemocratic and even despotic regimes in exporting states some of which even sponsor international terrorism. No nation worth its salt would wish to be held to ransom by a handful of despotic or at least autocratic regimes that control the spigots.
The situation as seen by many the largest oil consuming nations looks like this: one is paying a high price for a commodity that is finite in quantity, props up unsavoury regimes, finances terrorism, and, last but not least, destroys the environment.
The former Saudi Oil Minister Ahmad Zaki Yamani once observed that the age of oil would not end simply because supplies might run out. After all, he quipped, the Stone Age did not come to a close because the world was short of stones. What brought the Stone Age to an end was a cultural and political sea change that, in turn, inspired a technological revolution that developed alternatives to stone.
Whether or not we are witnessing a similar sea change in the case of oil is hard to tell. What matters, however, is that the world should not be invited to jump from the fire into the frying pan. And yet, this is what many nations, including some major industrial powers, seem to be doing by planning a massive switch to nuclear energy.
Nuclear energy may well cover some of the concerns with regard to dependence on finite and uncertain oil supplies. But, this new magic wand raises a whole host of other, perhaps graver, questions to which there are no obvious answers. The world should take a deep breath and consider practical ways to address the legitimate concerns of both exporters and importers of oil over the next three decades or so that is left of the “Age of Oil”. A hastily concocted energy strategy may give too many hostages to fortune ain an era already beset by uncertainty.