Jamaica Gleaner
Published: Sunday | May 27, 2012
The end of oil?
Edward Seaga, Contributor
In 2007, at the 10th anniversary of the Office of Utility Regulations (OUR), I gave the keynote address in which I made a valuable point which I will now repeat:
“Journals, studies, reports and eminent authorities speak, not of if, but when, reserves of oil will reach the point of diminishing production. The wider the briefing on the reserves of petroleum, the more the future becomes worrying. The future, it is truly said, ‘has a mind of its own’.
The resulting forecasts vary widely, but only a few see the peak production for oil as coming after 2020. One of the forecasts which is more optimistic is the authoritative International Energy Agency (IEA) which collects data from all oil-producing countries. The IEA predicts that the production peak will arrive between 2013 and 2037. Thereafter, production will decline by about three per cent per annum.
World Energy Outlook, the prestigious annual report of the IEA, believes that world oil reserves will exceed production to around 2030, if new reserves are ‘proved up’ in order to avoid a peak before that reference time. But what is worrying about ‘proving’ these new reserves is the projected cumulative investment needs of US$17 trillion to 2030 to boost production globally. This will be a huge challenge that may not be met.”
Conventional alternatives to oil do exist and are readily available in the world market: liquefied natural gas (LNG) and coal. Both are attractive alternatives because they are a fraction of the price of oil. LNG, as a substitute, must be approached with the recognition that it is a petroleum product, and could very well track the rising price of oil over the depleting years, leaving investors with very costly infrastructure facing the same conundrum of very costly fuel.
Coal is far more likely to sustain its comparatively low pricing because of its predominance as a fuel of critical need to American industry where coal is in plentiful supply. But the drawback is the serious pollution threat to the environment caused by burning coal.
Rapidly diminishing supply
Looking at the future of this choice which has been a riddle for more than a decade, the decision becomes more urgent and sharpened with rapidly diminishing supply, raising the spectre supply of exorbitant and unaffordable pricing. This would be a threat to the viability of economies, with the possible outcome of dire economic adjustments which could precipitate another global financial meltdown.
We must be seized by the recognition that civilisation, as we know it, would die if electricity supply should cease. When the generation of power abruptly failed in Manhattan in 1965, it plunged the city into total darkness. With darkness everywhere, so was looting and shooting. This catastrophe made man aware just how much his world depended on electrical power to provide light, run factories, hospitals and offices, provide telecommunication, television and radio services, pump water and fuel, operate elevators and air conditioners, and ensure the use of the labour-saving electrical conveniences of modern life. More than all, transport would cease from lack of oil, the ubiquitous fuel in one form or another.
The dependence on electrical power virtually across the globe is a signal recognition of the power of oil. Whether importing country or exporting producer, the ‘black gold’ is a critical determinant of growth of the economy and the lifestyle of the society.
Imported oil also represents a substantial cost. Measured as a ratio of GDP, oil imports have a significant impact, more so on trade. In the case of Jamaica, in 2010, the value of imported oil was equivalent to a staggering 121.1 per cent of domestic exports at present costs. The comparison can be drawn that the Jamaican economy is hostage to oil:
These figures are sharpened by further recent dramatic increases in costs in recent years. The spectre of possibly still-higher costs yet to come raises other deep concerns about threats to the viability of economies and the outcome of consequential economic adjustments which could precipitate another global financial crisis.
Such prospects are not to be dismissed. They are hinged on the rate of depletion of oil reserves which is now raising questions as to when the peak of production will occur, signalling the downward slope to the end of oil and prohibitive increase in prices well beyond the current US$100 range.
On the future of this single commodity so much of the world’s economy and lifestyle will depend over the next 30 years, we are forced now to look beyond today to create our own foresight of tomorrow. But this has its own uncertainties. As Mark Twain said of prophesies, “It is very difficult especially with respect to the future.”
Blurred vision
Our vision of the future is still blurred. But from the chaos, a pattern of new technologies are emerging with consequences so far-reaching as to begin to shape, once again, a new-world approach to energy.
New sources of energy, once barred as alternatives to conventional sources, for reasons of science, technology and finance, are now being dramatically unleashed in the same way that the splitting of the atom released new potentials once barred by scientific, technological and financial constraints.
In the days of cheap oil, no true vision existed of energising the deep-rural areas where hundreds of millions of the world’s population lived and whose only hope to see light, to refrigerate, to heat, to cook, to telecommunicate and to mechanise electrically, was to await the planting of poles and the stringing of endless miles of wire at costs far beyond calculation.
The resource base was then cheap, but infrastructure was crippling in cost. In today’s energy perspectives, we have reversed the problem of yesterday: the infrastructure is cheap, but the resource base is crippling in cost.
Science and technology, for many years, has been researching the commercialisation of inexhaustible energy sources, of which solar is a prime prospect. Oil interests, too, have not been dormant in their investigation of these new sources.
The research required, and the technological breakthrough necessary, must continue until it can create in any household its own generating plant, using inexhaustible solar energy available to all. No priority exists for those whose lives are sheltered by the flick of a switch to provide light, water, air, heat and entertainment by sound or on the screen, for all of which a monthly billing can be paid. Only those for whom these necessities are becoming a diminishing reality can understand the need to control the damage of dramatically mounting costs.
It must be within man’s genius that he who has explored the cosmos, walked the moon and sent probes to the limits of our solar system should also have the capacity to place within a neighbourhood home the technology to cook food, heat water, provide cool air, refrigerate perishables, light the darkness and provide entertainment, using our source of atomic energy, the sun.
This cannot be a matter of if; it must be when. Robots are walking on Mars, a planet light years away in distance, digging samples of rocks and taking spectacular pictures to impress on us the genius of man. But which is priority, the genius who can mobilise the robot on Mars, or the one who can suffice the needs of neighbourhood homes?
I have focused on the power of the sun as a principal alternative resource not because other renewable resources do not exist, but because wind, water, wood and waste are all restricted to particular local or regional locations for purposes of generating electrical power needs. But the power of the sun is ubiquitous; it is available everywhere and is an inexhaustible resource that can be within the reach of all mankind.
Can solar power be commercialised at competitive cost? Portugal has announced the construction of the world’s largest solar-energy power plant on a 618-acre site by 2010, to produce 62 megawatts, at a cost of US$307 million. It will create 240 permanent jobs. The cost of roughly US$5 million per megawatt compares with conventional oil-fuelled plants, which require US$1 million-US$2 million per megawatt for greenfield construction. But the operating costs tell a different story: solar costs 2 cents per kilowatt-hour to produce energy, while conventional oil-based generating systems cost three times as much, 5.9 cents.
Sweden is now developing a solar-powered plane to fly around the world. Solar power, it is estimated, is capable of supplying up to 10 times Jamaica’s needs.
Our vision must be to create a settled environment of stable supply for the most vital utility in the life of civilised man, electricity, and to offer to those who have not yet enjoyed the comfort of an energy-charged society the chance to experience new lifestyles with better prospects for the future.
Historically, for a great many centuries, oil has been the base on which civilisation has progressed immeasurably, and at a dazzling rate of development over more recent times. The end of that era, it is now recognised, is forthcoming. It is time now to unveil a new era and unleash new power with no less prospect than the world of new technology created by the splitting of the atom. The power of the sun and of natural elements, which are our inexhaustible atomic resources, is that new era:
Surely no more depressing subject exists than one which envisages the prolonged economic distress of the developing world, as a consequence of inaction;
Surely no more economic case exists than to ensure the transformation of one energy base to another, more affordable, more available, and more suitable;
Surely no more enticing case exists than one which ties the interests of private and public sector in official programmes to advance the development of mankind.
The peculiar coincidence of circumstances today, driven by mounting needs to abandon the old and marry the new with urgency before missed deadlines overwhelm us, may not coexist again.
If we fail, the real tragedy will be that we failed to put crisis into perspective; to recognise it as nothing more than a challenge; to exercise that vision that creates opportunity from adversity; and to measure up to the urgent call of our time by creating a future that is not distant but just around the corner.
Edward Seaga is a former prime minister. He is now chancellor of the University of Technology and a distinguished fellow at the UWI. Email feedback to
