By Michael J. Economides (China Daily)
Updated: 2008-06-06 07:47
It would be more amusing had I not been personally involved. Three years ago I was a lone voice outrageously predicting $100 oil, debated on many occasions on national and international TV by those predicting $50 or even less. The tapes are still available.
Now, $100 seems conservative, others have jumped on that number by the carload and the OPEC president said recently that oil may climb to $200. This, by the way, is the same organization that four years ago was insisting that the "official" price was between $24 and $28, while we were paying $50.
Oil is at $125 with no end in sight because of two simple but unsavory facts: We in the developed world have earned the right and the luxury to be ridiculous, and oil producing countries, knowing this, have become "militants".
It is countries like China and India, the next economic superpowers, that will bear much of the brunt of higher oil prices. They need energy to develop their economies.
First a disclaimer, in itself silly, that I have to make. This article is not paid by Big Oil. Second, I have a simple belief: energy and its abundance is perhaps the most important commodity in modern life, bar none, and any energy shortages will plunge the world in an economic tailspin we have never experienced before. If one does not believe this, no need to read further.
Of the world energy demand 87 percent comes from fossil fuels, oil, gas and coal. This fraction has not changed much since the 1970s and the first "energy crisis", while energy demand has more than doubled.
By almost everybody's estimates by the year 2030, the total world demand will increase by 50 percent and oil, gas and coal will still provide 87 percent of the world energy. The reason we use them is not because of some evil conspiracy headed by a dark knight. We use them because they are the easiest, most flexible, most reliable and most efficient forms of energy.
Biofuels as done today, cause a negative energy balance not even considering their impact on food prices. I have no aversion to wind or solar. I love the sun, I am Greek. But they are eminently unreliable and, even in their best case, without government subsidies, they make $200 to $2000 oil still attractive. It is that simple.
But here is how we are ridiculous in the developed world and it would have been funny had we not run the danger of committing societal hara-kiri. We have let dazed environmentalism of the most outrageous variety put on a tie and become mainstream, dominate the covers of national newsmagazines and, predictably as of late, earn Oscars, Emmys and Nobels.
There are no alternatives to fossil fuels for decades and the transition will be long and painful. Nothing will happen overnight. We will continue to be a fossil fuel-dependent economy for the foreseeable future.
To boot, the US imports now almost 70 percent of 21 million barrels per day of oil demand, China is importing now close to 50 percent of its demand. The oil-exporting countries have noticed.
Big Oil is of course blamed by many. The truth is that big oil companies have very little impact on current oil prices and their influence is waning, giving way to countries that own the reserves.
Instead of being protected they are maligned by politicians in many countries and a gullible public. Simple question: suppose that the energy industry is all nationalized and the ExxonMobils of the world are taken over by governments. Does anybody believe that gasoline prices would be lower?
It may surprise almost all to realize that, having to buy oil from oil producing nations, Big Oil and the consumers are in much closer predicament than taxing and regulating government or elitist, touchy-feely politicians and environmentalists.
And of course the biggest boogieman is climate change hysteria.
Many politicians have bought the man-made origin and have adopted the slogan of 80 percent reduction in carbon dioxide emissions (the main greenhouse gas produced from burning fossil fuels) by 2050.
If they succeed they will bring a growing developed and developing world to the level of the lowest 5 percentile of the world's poorest countries. Maybe that is the egalitarianism they seek: to make all of the world that poor.
The author is a professor at the University of Houston and editor-in-chief of Energy Tribune
(China Daily 06/06/2008 page9)