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08 Aug 13 06:58

The problem isn't that our oil reserves will run out one day because demand will outstrip supply. The problem is that soon we won't actually be using enough of the stuff. And this could have geopolitical implications for the relationship between Russia and the United States, as well as for the internal security of some Gulf States. This is the gist of a leader in the current edition of the Economist which says that oil consumption could be nearing its peak.

Firstly, there is fracking which is revolutionizing the way gas can be extracted from the earth. Shale gas, says the Economist, can be used to power trucks and ships and also employed in heating systems. Secondly, ongoing innovation in the design of the internal combustion engine and in the materials used to manufacture cars is combining to improve fuel efficiency generally.

And even in China, second only to the U.S. in its appetite for oil, the government has imposed tougher fuel efficiency standards on motor vehicles. The paper writes that if the Chinese government decides to reduce its reliance on imported oil still further by gearing its transportation system to hybrids, demand for oil will come under even more pressure.

In the medium term, the shale gas revolution in the US could undermine Russia's political influence in Europe, dependent as this is on the country's massive oil and gas exports. And America's new status as a major gas exporter could lead to even more tension between these two countries.

In addition, diminishing oil income for the Gulf States could make it increasingly difficult for them to keep the lid on simmering social unrest. On top of this, says the Economist, America's drive towards "shale-powered energy self-sufficiency" might spell the end of the unconditional support it has given to some of its Arab allies.

Should we be worried by these scenarios?


Category: Sustainable energy: Nuclear


4 Comments

Oliver Werneyer - 8 Aug 2013, 1:01 p.m.

I think this is a major risk. Anything that fundamentally threatens the status-quo will pose a risk. This is heightened in scenarios where governments or massive nationals are involved. The repercussions from the impact on them are so far reaching that in some cases they also have a "too big too fail" status. Imagine someone launched a new energy technology that would allow individuals to be completely energy independent (i.e. home, transport, other) and not require the larger grid then you could see a massive collapse of companies that employ large number of people and taking entire economies with them (because of their size).

Yes, it is really crazy when you think about how these changes are occurring. For me the big problem is not the development of new sources (and with it the change in power) as this has happened all throughout history. i think the problem is the pace at which it happens these days which can cause major instability and not give those who are losing influence a chance to catch up or diversify. That is when people get "irrational" in their responses and ways they approach these changing dynamics.

Alicia Montoya - 8 Aug 2013, 8:22 p.m.

@Richard: Is it risky? I guess it depends from which point of view. For the States, this is an awesome opportunity, and one that they're not going to let pass them by (and neither would anybody else in their position). For the other oil producing nations that have, until now, had us all by the *bleep*, it's terrible news. As to the civil unrest it may create in those nations, I'd say, about time. Many oil-rich nations also are home to the highest Gini coefficients (or income inequality) in the world. Time to rebalance.

@Oliver: Threatening the "status quo" is almost always a good thing in my view. We live in a state of flux. Only those who are agile and able to constantly adapt, innovate and add value in a constantly changing, competitive environment will thrive. And that's a good thing. As for the speed of the changes we're witnessing, I can't imagine how any change in humanity's past didn't feel as fast and life-changing.. or more! I mean, the discovery of metal tools in the Stone Age? Whoa! The steam engine in the 18th century? Jeez! And what about electricity? Totally revolutionary! So, in the context of those humanity-changing innovation breakthroughs, I see this as a tiny shift that will have definitely benefit the US' economy, have certain geo-political consequences (many of which, in my view, could be good) and probably have a negligible effect elsewhere.

For me, the biggest risk in this whole gas debate is still environmental: A leaked EPA presentation this week seems to show groundwater contamination from fracking, allegedly censored by the current Obama administration: http://www.huffingtonpost.com/steve-horn/exclusive-censored-epa-pa_b_3708904.html
"EPA found hazardous substances, specifically arsenic, barium or manganese, all of which are also naturally occurring substances, in well water at five homes at levels that could present a health concern," read the EPA desk statement. So fracking, not in MY backyard, thank you very much (whereas wind turbines, bring 'em on!)

Paritosh - 11 Aug 2013, 4:07 p.m.

I don't think it'd be as risky. US has nothing to worry, it has enough number of people from each country of the world!

If US goes on shell and that reduces reliability on traditional petroleum products, then it would be a blessing in disguise for other nations.

It'd perhaps be opening up of more opportunities and interesting times! Reduction in risks as well cause believe it or not transportation is the best form of communication and the more of it connects secluded group of people the better will be the prospects of peace to the world.

Rolf - 28 Aug 2013, 3:55 p.m.

A lot is currently written about fracking, non-conventional oil, the end of US petroleum imports, and how this all will affect the global balance of power. For the Middle East, the end of US import - if it ever arrives - does not play such a role at first sight, as the US imports only a very small part of its petroleum from the Middle East, and, btw, has done so since the 1990s. Asia picked up the slack for the Middle East. But the more important point is what US self-sufficiency could do to the price. Petroleum markets are global, so if US self-sufficiency reduces demand, this will certainly lower prices, and thus income in the Middle East. But then, the Middle East, or, more precisely, the oil producers in the Middle East have been living with wide fluctuations for decades - and remained relatively stable. The Arab Spring did not erupt in the oil-producing states of the region. Predicting the oil price beyond tomorrow is a perilous undertaking. Hundreds of analysts have already ruined their careers and reputation on doing so. Geopolitically, a replacement of the US as importer of ME oil with Asian importers could mean that China's and India's influence in the ME will grow as US influence in the region recedes. But this is happening anyway, with the global shift of power dovetailing the geo-economic alignment from West to East, North to South. Having said all this, we don't know yet how sustainable US energy self-sufficiency will eventually be. Estimates of newly accessible reserves due to fracking vary quite a bit. Political risks - from the producers point of view - in terms of environmental legislation and regulation may still materialise. Producers of non-conventional oil and gas in the US are highly leveraged; some of them may collapse if the economy becomes jittery again (economic forecasts are different, I know, but you never know with these rising interest rates...). So, all very early days about a global geo-energy realignment. But The Economist throws out a few good, challenging thoughts. I hope I added a few more.


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