Economic Forces Behind the Ongoing Energy Shift

Remember the energy crisis of the late 1970's, when there were shortages and lines at gas stations. Things returned to normal when prices returned to normal. The increased demand for oil was met by increased oil production from regions outside OPEC. Areas such as; Russia, South America, Asia, North Slope of Alaska, and the Gulf of Mexico, but in recent year's production outside OPEC has peaked and demand has continued to grow. OPEC countries have not kept up with the demand partially because they are unable to and partially because they are unwilling. As long as demand out paces supply prices for oil will remain high.

In the late 1970s, politicians warned of energy insecurity and scientists warned of climate change due to uncontrolled use of carbon based fossil fuels. In today's world these issues are no longer warnings they are reality. Turmoil in the Middle East, Eastern Europe and former Soviet Union countries along with increasing world demand for oil because of unprecedented economic growth in China, India and elsewhere has created an atmosphere of insecurity with regards to energy. Increasing worldwide demand is causing upward pressure on the price of energy and as competition for the available supply increases so will energy insecurity.

There is no denying that our climate is changing because of global warming caused by greenhouse gases which result from carbon based fossil fuels. Increasingly more powerful storms from the Atlantic and Gulf of Mexico have disrupted refining capacity in the U.S. for example, and unprecedented heat waves have hit Europe and the polar ice caps are melting. It has become all too obvious that the worlds fossil fuel dependency is not sustainable for economic and environmental reasons and a shift is underway that will ultimately result in sustainable energy supplies.

The uncertainty created by an energy crisis results in tension in the world economy. Much of this is due to certain miss-understandings surrounding the current energy situation. A better understanding of these issues can relieve some of the tension as well as facilitate the shift to sustainable energy sources. First, the world is not running out of oil. In reality there continues to be discoveries of vast oil deposits around the world, in addition there is oil available from sand and coal that could supply the world for decades. The problem is that the cost of retrieving the oil is increasing.

Second, rising prices is not all because of Asia. In reality the demand for oil doubled in North America in the past 10 years. The demand for oil may double in Asia over the next 30 years, but the price increase of energy is spread across the whole energy spectrum because of the increased cost of energy producing equipment. Prices are nevertheless rising throughout the world.

Third, biofuel is not an immediate answer to our energy needs. Biofuel may cause more harm to the environment than it prevents when the change in land use is taken into effect. Also biofuel production has been linked to food shortages in certain parts of the world. Technological developments may make biofuel more sustainable in the future but such improvements are a long way off.

Forth large portions of the worlds electricity needs cannot be met by non-carbon fuel in the foreseeable future . This may be true eventually however; it will take decades before a significant percentage of the worlds electricity is produced from non-carbon sources.

Fifth, nuclear power is necessary for future supplies of energy. Nuclear power is a dependable source of energy that does not produce any greenhouse gases and thus does not contribute to global warming. It is also proven to be a very safe and relatively inexpensive source of energy. France produces 80% of its electricity from nuclear power plants and has not had any Chernobyl type accidents.

Sixth, private industry cannot accomplish the shift to sustainable energy on its own. The task is truly monumental and the stakes are enormous. It is clearly going to take coordinated public/private initiatives involving public policy, economic and tax incentives to facilitate the shift to sustainable energy sources and the building of new energy infrastructure the world over.

We now know for certain that the world's dependency on fossil fuels is unsustainable. At the same time it has become obvious that we must drastically slow the creation of green house gases to avoid irreparable damage to the environment. This will limit the options available and will speed up the shift away from fossil to more sustainable forms of energy. Two things are certain regarding the future of energy; one, the energy shift is underway and two, there is no stopping it.