A Short History of the "Energy Problem"
Summary of a presentation byHenry Lee
Director , Environment and Natural Resources Program
John F. Kennedy School of Government, Harvard University
Energy policy has never been allowed to concern itself with energy alone. Throughout the last century, discussions of energy have always had to take other dimensions into consideration. From the 1930s to the 1970s, energy was perceived as an international economic and strategic problem. Winston Churchill moved Great Britain from its dependence on coal to reliance on oil, and took diplomatic steps to open up the Middle East.
“It was state departments that dealt with oil,” declared Henry Lee, Director , Environment and Natural Resources Program
John F. Kennedy School of Government, Harvard University
In the 1970s, oil became associated with security problems, as the Arab embargo and Iranian revolution were irrevocably linked to our oil consumption.
In the 1990s, Lee said, public opinion on oil was linked to fears of environmental problems such as acid rain, smog, and irreversible pollution.
Today, security concerns are back, only more pronounced and comprising a wider range of questions. In addition to historical concerns about the Middle East, we now have to consider vast areas such as China, India or Russia, each of which has its own regional diplomatic tangles. For instance, what does the role of China as an oil importer mean to the United States? How do emerging nuclear players such as North Korea or Iran affect our energy policies? How do we reduce dependence on unstable regimes?
At the same time, environmental fears are top-of-mind, with global warming high on the list. As global population explodes, how do we keep pollution in check? “Issues of the environment and energy are more global and more urgent,” Lee said.
Still, Lee said, some factors aren’t changing:
• Laws of supply and demand still apply.
• Oil supplies aren’t about to run out. Even if the cost of production doubles or triples, fossil fuels will remain the low-cost option.
• There is one world oil market and thus complete independence is an unattainable goal. Richard Nixon’s dream of energy independence is an unattainable goal.
• The U.S. has 250 years of coal, but limited reserves of oil and conventional gas.
• Approx 75 percent of the world’s oil reserves are located in Middle East, while 42 percent of the world’s gas is in Russia and Iran.
• Prices of energy commodities, especially oil and gas, are extremely volatile.
And yet, others are changing:
• Oil supplies aren’t about to run out. Even if the cost of production doubles or triples, fossil fuels will remain the low-cost option.
• There is one world oil market and thus complete independence is an unattainable goal. Richard Nixon’s dream of energy independence is an unattainable goal.
• The U.S. has 250 years of coal, but limited reserves of oil and conventional gas.
• Approx 75 percent of the world’s oil reserves are located in Middle East, while 42 percent of the world’s gas is in Russia and Iran.
• Prices of energy commodities, especially oil and gas, are extremely volatile.
And yet, others are changing:
• Technologies for oil and gas production have improved in last 20 years.
• Governments, not oil companies, own most of the world’s oil. So every decision involving oil also involves politics.
• China and India are becoming major players.
• Developing countries will account for almost 80 percent of future growth in oil demand.
• OPEC plans to invest more than $100 billion over the next five years, and most of this new oil will be sold in Asia. There’s a significant change in the structure of the oil market.
• Natural gas is emerging as an internationally traded commodity.
• Biofuels may emerge as a major source of motor vehicle fuel by 2025, but they may not resemble the biofuels we see today.
• Governments, not oil companies, own most of the world’s oil. So every decision involving oil also involves politics.
• China and India are becoming major players.
• Developing countries will account for almost 80 percent of future growth in oil demand.
• OPEC plans to invest more than $100 billion over the next five years, and most of this new oil will be sold in Asia. There’s a significant change in the structure of the oil market.
• Natural gas is emerging as an internationally traded commodity.
• Biofuels may emerge as a major source of motor vehicle fuel by 2025, but they may not resemble the biofuels we see today.
No Silver Bullet
While there are numerous known alternatives to providing energy, none is without limitations or complications, Lee maintained. Each options has drawbacks to be considered.Oil - The challenge is to find ways to use oil more efficiently, especially as regards transportation. Detroit must make more fuel-efficient cars, and oil companies should help in making biofuels.
Natural gas - The downside here is that investing in natural gas means investing in unstable economic environments, such as Russia, or in unstable geopolitical environments, such as Iran, Africa and the Middle East.
Coal - We need new technologies to reduce conventional and unconventional air emissions.
Renewable energy sources - We must identify land, sites and locations where we can build the infrastructure needed, be it windmills, solar panels, and others. Then we have to integrate wind and solar instruments into existing electricity networks.
Biofuels - If crops such as corn are to be diverted for energy use, it will be challenging to keep food prices down. In addition, we will have to find ways to minimize the environmental impacts of this technology, especially upon water supplies. And thirdly, we will have to develop more efficient conversion technologies so as to maximize the net energy gain from agricultural crops.
Nuclear -It will take time to develop public trust in this technology. It has been 25 years since Chernobyl, but Americans are still reluctant. The only real progress in nuclear power development has been in Asia.
In short, no matter which energy option we choose, and we must increase efficiency and we must convince millions of households and businesses to make investments in their future.
Historically, Lee said, it has taken about 50 years to significantly change energy systems. (For example, the move from wood to coal, and the subsequent move from coal to gas.) This time, the task has become more complicated, as it involves greater numbers of people, greater variations in economies, and vastly more infrastructure around the world that needs to be powered. The next move will require huge sensitivity, far-sightedness, and creativity.
Wherefore energy policy?
Lee posed six questions that he said must be answered in forming any coherent energy strategy:
• How do you attract sufficient investment in a market characterized by highly volatile fuel prices?
• Investments in improved energy efficiency have three attractive characteristics – they are the least expensive, they have enormous potential, and they enjoy political popularity. Why have we done such a poor job in capturing this potential? What might be done going forward?
• Given concerns about the environment, nuclear proliferation and waste, is reconsideration of nuclear power a realistic option? Is it reasonable to expect that we build nuclear plants?
• To reduce U.S. reliance on imported oil, automobile efficiency must improve significantly, and substantial amounts of substitute fuel must be developed and commercialized. What is the potential for achieving either?
• Energy projects have environmental footprints. Is the balance between meeting our energy needs and protecting our environment being met?
• Many people believe that designing and implementing a new energy vision will require political leadership. But in the world of campaigns, ideological polarization, large public deficits, the perception of risks implying huge political costs, and an inability to take decisions quickly -- is this leadership able to appear?
• Investments in improved energy efficiency have three attractive characteristics – they are the least expensive, they have enormous potential, and they enjoy political popularity. Why have we done such a poor job in capturing this potential? What might be done going forward?
• Given concerns about the environment, nuclear proliferation and waste, is reconsideration of nuclear power a realistic option? Is it reasonable to expect that we build nuclear plants?
• To reduce U.S. reliance on imported oil, automobile efficiency must improve significantly, and substantial amounts of substitute fuel must be developed and commercialized. What is the potential for achieving either?
• Energy projects have environmental footprints. Is the balance between meeting our energy needs and protecting our environment being met?
• Many people believe that designing and implementing a new energy vision will require political leadership. But in the world of campaigns, ideological polarization, large public deficits, the perception of risks implying huge political costs, and an inability to take decisions quickly -- is this leadership able to appear?
In summation, choosing energy solutions for the coming decades will require ordinary citizens, industry, legislators and governments to take some painful steps. Lee said American lawmakers would have to buckle down and raise gas prices, invest more in biofuels, cease to focus on the short-term popularity of any policy, and hunker down for some “very significant long term energy problems.”
Written and reported by Elizabeth Wise
Contributor, Analysisonline, Washington, DCWritten and reported by Elizabeth Wise