Re: Energy and "the Clash of Civilizations" -- a policy thought problem

From: steve (
Date: Thu Oct 18 2001 - 11:51:02 MDT

Here's an interesting article with some concrete proposals. Does anyone on
this list know how far the author is right about the relative cost of energy
alternatives given mass production ?


The West must break its addiction to oil


If there is one thing demonstrated by yesterday's assassination of an
Israeli minister it is that the Middle East is a madhouse. When lunatics
take over the asylum - whether they are religious fundamentalists, as in
Afghanistan, Iran and Saudi Arabia, or secular megalomaniacs, as in Iraq -
there are two sensible ways for the rest of the world to respond.
The first is to restore some semblance of order and the rule of law, if not
of reason. That is what America and its allies are now doing in Afghanistan,
with every prospect of success in the short term. The second response is to
try to protect the rest of the world from the consequences of future
outbreaks of Middle East madness.

Much has been said about the military and diplomatic components of this
"second phase" of the war against terror. But if the long-term objective is
to offer permanent security for the people of America, Europe and Asia from
the consequences of sharing a world with the Middle Eastern madhouse, then
the most important element of the war against terror has not even been
discussed. That element is a coherent, patient and relentless strategy to
free the world from its addiction to Middle Eastern oil.

There are several clear links between terrorism and Middle Eastern oil. One
such link is noted on this page by Gary Hart: American foreign policy has
become a "hostage" to oil dependence. Energy dependence has tied the West's
hands in pursuing long-term diplomatic interests.

An even more direct link runs from oil money to terror. Oil money is the
main source of financing for terrorism and religious fanaticism throughout
the Islamic world.

Another link with terror runs through the debilitating economic effect of
oil wealth on the producing countries themselves. Economically, oil has been
more of a curse than a blessing for the Middle East. While it has produced
fabulous riches for ruling families and their cronies, oil wealth has
devalued education, protected medieval social structures and discouraged
genuine wealth creation. The creativity and entrepreneurial drive that were
once synonymous with Arab culture have been diverted into a corrupt,
zero-sum game of squabbling over inert mineral wealth.

It has long been a maxim of development economics that "the lucky countries
are the ones with no resources". The economies that have developed fastest -
and have done best for their common people - have been countries such as
Korea, Taiwan, Malaysia and China, which have been forced to rely on
education, technology and commerce, rather than living off natural resources
in the style of such "richer" countries as Russia or Nigeria. Even in the
Middle East, some of the most prosperous and stable countries, for example
Jordan, Morocco and Bahrain, have been the ones with little or no oil.

But isn't reducing our dependence on Middle Eastern oil just a pipe-dream?
After all, energy use will inevitably keep expanding as living standards
grow around the world. And crude oil currently accounts for 49 per cent of
global energy consumption. To make matters worse, the Middle Eastern members
of the Organisation of Petroleum Exporting Countries (Opec) are sitting on
53 per cent of the world's proven oil reserves, and Saudi Arabia alone
controls almost half this sea of oil.

All this is true, yet the quest for energy independence may not be as
quixotic as suggested by many energy experts, who tend to have an interest
in preserving the status quo. For a start, the figures on current oil
production - as opposed to the reserves which may or may not be pumped from
the ground in future decades - make the problem look rather less daunting.
At present, Middle Eastern Opec members produce 26 per cent of the global
supply of crude oil, equivalent to just under 13 per cent of the world's
total energy consumption. Saudi Arabia alone provides just 5 per cent of
global energy supply. Iraq and Iran each account for around 1 per cent.

In any other business, the idea that the world could be held to ransom by a
producer controlling just a few per cent of global output would be dismissed
as absurd. What, then, is so different about oil? The answer consists of
three parts, each of which relates to a different component of the strategy
for energy independence that is urgently needed after the terrorist attacks.

First, it is widely assumed that nothing can be done to reduce energy
consumption without hitting living standards and economic growth. This is
utter nonsense. A simple shift in tax structures - sharply increasing energy
taxes and recycling the money back to consumers through other tax cuts -
could have a dramatic effect on energy demand.

Of course, President Bush has rejected any such policy, in part because he
represented an oil state. And the British Government last year moved in the
opposite direction - Gordon Brown unforgivably cut petrol duties and eased
industrial energy taxes in his capitulation to the fuel protesters. But if
either the US or British Government are serious about their war against
terrorism, these egregious policy errors can surely be reversed.

Secondly, the Opec cartel has amplified the power of individual Middle
Eastern countries. Opec countries account for 40 per cent of world oil
production and 19 per cent of total energy demand. The second step in
disarming the oil weapon is therefore to try to break the cohesion of Opec
and, above all, to accelerate the development of non-Opec oil sources. The
most promising region for increasing non-Opec production is the former
Soviet Union. If the West was willing to put extra investment into that
region, new oil equivalent to half Saudi Arabia's current production could
be pumped within a few years.

The West could also work much more effectively to neutralise Opec's power by
using strategic reserves owned by the US, European and Japanese Governments.
These reserves should be built up to much larger volumes during periods of
low demand (such as now) and then dumped on to the markets whenever Opec
tries to squeeze supply.

The third reason for the Middle East's excessive economic power is the
assumption that oil must remain the world's dominant energy source for at
least the next 20 or 30 years. But there is nothing inevitable about the
dominance of oil. Car engines that can run on liquified natural gas and fuel
cells have already been developed by several motor manufacturers. Vast
amounts of electricity can be generated from wind, nuclear, solar, biomass
and other non-oil sources, all of which have the additional advantage of
eliminating carbon dioxide and the greenhouse effect.

Why are these new technologies not already in use, or at least built into
long-term energy planning, which still rests overwhelmingly on oil? The
global energy and motor industries believe it is in their interests to delay
for as long as possible the transition from oil. Oil companies and car
makers know that alternative technologies, ranging from car fuel-cells for
cars to wind turbines for electricity generation, will never become economic
until they benefit from the rapid cost reductions that come from mass
production. As long as these technologies are relegated to experimental and
pilot programmes, they will always appear prohibitively expensive and
premature. But mass production will remain impossible until there is mass
demand - and mass demand is out of the question until energy companies
convert their distribution networks to offer alternative energy supplies.

This is a clear case for government intervention, through the tax system,
through subsidies and through direct regulation - for example, by requiring
drastically lower fuel economy standards and instructing oil companies to
make alternative fuels available at their filling stations during the next
five years.

Sheikh Yamani, the former Saudi oil minister, once warned his countrymen
against being too provocative in exploiting their market power during the
golden age of oil. He noted that "the Stone Age did not end because the
cavemen ran out of stone". It is now time for the Western world to prove
Sheikh Yamani right. For the oil age, September 11 must mark the beginning
of the end.

Copyright 2001 Times Newspapers Ltd. This service is provided on Times
Newspapers' standard terms and conditions. To inquire about a licence to
reproduce material from The Times, visit the Syndication websi

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