If the world increased its energy efficiency by 3 per cent a year to 2100, the entire world could live at a European standard of living and use just half the fossil fuels we do today.
Oil price hit $84 a barrel a few days ago, amidst fears that the Kurdish rebel problem would lead to the snapping of Iraq’s supplies. And closer home, despite an appreciating rupee, we have been oscillating between ominous expectations of petrol and diesel price increases, to political assurances of ‘no hike now’ with short shelf life, though.
“An interesting and scary thing about high oil prices is that we realise how incredibly interconnected global economies are, and how little we understand the consequences of these connections,” observes Ms Lisa Margonelli, the author of ‘Oil on the Brain’, in the course of an exclusive interaction with Business Line.
“Despite the deep interconnections, we live very differently: after all, Americans continue to use this enormous amount of fuel per capita and that is simply not available to other consumers,” she adds.
A graduate of Yale University, Ms Margonelli is a California-based Fellow at the New America Foundation ( www.newamerica.net), an institute that relies on ‘a venture capital approach’ to invest in ‘outstanding individuals and policy solutions that transcend the conventional political spectrum’. Ms Margonelli’s book is an engaging tale of her journey from the neighbourhood gas station to the oil well.
Excerpts from the e-mail interview:
The US plays an important role in the oil economics. But with the shift now towards Asia significantly, do you think the Chinese as well as the Indian people and their automobiles hold the next piece in the oil puzzle?
Oh yes. Right now the power of the American consumer is that they have big wallets and a huge appetite. But it’s the world’s growing middle class in China and India who will really spur new demand for oil. I’ve heard that only 12 per cent of the world drives cars now — the big question is what will the other 88 per cent drive? (I would imagine they’re likely to buy a Cheri or one of these $2,500 Tatas rather than a Cadillac.) What kind of fuel will they use? (We need cars that don’t pollute or we’ll all have hard time breathing.)
In the near term, new consumers are playing a big role in driving oil demand, and creating an atmosphere where oil investors assume prices will keep rising. But in the long term, it’s these new consumers who will drive the development of new fuels and new vehicles. We’re in a funny time where the money and the future are in different places.
You have talked in your book about how a simple phone call from a warlord in Africa can change the price of oil in a matter of hours. Leaving alone the power of mobile communication, do you think Africa is going to play an even more important role in oil politics now?
Africa is already playing a role in oil politics — Nigeria, Libya, Algeria, Angola, Sudan, and Chad. As the politics of getting oil in the Middle East and Russia has gotten tougher, Africa has been seen as a place where the politics are different, but money still speaks. However, recently, that’s changed. Angola has joined OPEC. Chad has taken a more nationalistic stance on its oil reserves. In Sudan, Chad, and Nigeria, Chinese companies are making a lot of deals —which is also changing oil politics.
What is your take on the acquisition by Indian oil companies of oil assets in other countries?
I understand that Indian companies are buying oil assets for strategic reasons — to compete with China and the West. But they’re clearly bidding on the riskiest properties politically and geologically. As the world’s largest democracy, India has a complicated and growing leadership role in global politics. I’m not sure Indian companies will ultimately be comfortable with the risks they’ve taken on.
The contentious Iran-Pakistan-India pipeline…
Iran, Pakistan, and India have some economic and geo-strategic issues in common and the so-called Peace Pipeline could be a way to cement those commonalities and begin to work through the differences. But, um, what’s the hold-up? I’m being flip, but the process of working through those differences to get the pipeline built will be a big step for the region, going beyond the symbolism of the pipeline and the importance of the energy it carries.
The US and its government have often come under the hammer for oil policies, be it with regard to Venezuela, Iran or Iraq. But is not the government doing the right thing by ensuring oil wells are there for its people? After all, oil is a commodity that can make or break a government. Nobody knows it better than George Bush who is known for working for his family’s oil businesses before making the unsuccessful run for US House of Representatives in 1978.
Americans DO use a quarter of the world’s oil production, so we are very dependent on other countries. So we’re in a bind, because our power in the world partly derives from both oil dependence and our sense of mission derives partly from the myth of independence. That doesn’t mean we have a right to other countries’ oil wells. That is a really un-American idea, I think. You are right that American politicians live and die by gas prices. That’s one of the reasons the US doesn’t have a forward thinking energy policy — our politicians work in four-year cycles, but a good energy policy needs 10 or 20 years, which is too long for a political payoff. Anyway, at the moment George W. Bush is too busy being buffeted by other problems to worry much about gas prices.
With limited amounts of crude and consumption set to go higher as more people buy cars and fewer drilling it out of the ground, is oil really heading for $100 per barrel? How far is oil price driven by demand and supply economics, as compared to speculative forces? Are speculators in commodity futures raking in profits at the cost of the less privileged, as some allege?
I think oil will keep going higher until demand starts to fall off. Right now oil prices are like someone trying to figure out how deep a well is by using a stick. They keep making the stick longer to see if they can reach the bottom. Sooner or later people will stop buying, and then prices will fall.
Speculators — sure there are speculators. But until we find the bottom (or the top) for consumers, those speculators are just making good bets. There is no doubt that this is hurting the poor — in the world as well as in the US.
I really think that governments need to push energy efficiency — lots and lots of efficiency — to protect their economies, their poor, and the climate. Which brings me back to the Tata people’s car — what kind of fuel economy would it get? I think we should push for cars that get 100 km per gallon or more. In the 1980s I had a tiny Toyota that got about 90 km per gallon.
In your opinion, which fuel holds the most promise: hydrogen or electricity?
At the moment, barring a big jump in the technology to make and store hydrogen, I’m putting my money on electric cars. But electric cars can also be seen as precursors to hydrogen because the fuel cells act like a big battery.
I think it’s a staged process rather than either or. But I think that energy productivity needs to be a real priority, whichever fuel is used.
If the world increased its energy efficiency by three per cent a year to 2100, the entire world could live at a European standard of living and use just half the fossil fuels we do today.
That’s been called the “conservation bomb” and Art Rosenfeld and John Wilson wrote about it. If you take a programme like that, and then add renewable fuels to reduce the amount of fossil fuels we use, you’d be looking at a very different world — with a lot less smog. Of course, you’d still have a lot of traffic.
What’s your take on bio fuels? Are they a feasible option, something that could replace oil in the next century? Is there a risk that food may turn costlier owing to the diversion of harvest to the energy market?
Bio fuels carry all kinds of risks — risks to farmers around the world, risks to food consumers, risks to investors since at the moment there’s no commercially feasible way to make cellulosic ethanol.
They also carry a lot of promise — but their success will be in their attention to details. I hope that we take in the lessons of the oil economy — that your economic future is only as secure as the environmental and social security of the people along your energy supply chain.
If bio fuels are going to work, they have to create prosperity all along that supply chain. They also have to be environmentally sustainable. People have to get a fair deal.
If people are starving in one place because of biofuel crops, then people in another place will attack those fuel crops and the whole market will pay for the impact. Politics may be local, but the effects are becoming global.
On your current research, and your next expedition…
I’m doing more research on the supply chains for alternative fuels and pursuing some stories about unexpected technology transfers. I’m also really interested in whether the fight against global climate change will bring new economic opportunities or not. Travel. Well, I’m trying to stay in one place for a little while.
KUMAR SHANKAR ROYhttp://InterviewsInsights.blogspot.com