The U.S. – Venezuela energy showdown

The developing global energy crisis has at least three main aspects that should be considered: one is psychological, the second is geological and the third is technological.

The psychological component.

This is probably the most important in the very short term and the one that could lead to widespread conflict, including war. It has to do with the interruptions in the normal supply-demand relationship between producers and consumers. The rupture of an Alaskan oil pipeline, the kidnapping of oil workers in Nigeria, the strike of Ecuadorian petroleum staff in Ecuador, the bombing of a refinery in Iraq, some of the ranting of Venezuelan president Chavez, any of these events send ripples of alarm throughout the industrial world and can play havoc with stock exchanges all over the world. A major disruption of oil supplies, either due to a natural disaster or to a political decision in a major producing country, could create chaos in the market.

The geological component.

This is a component over which we have little control. The answer to how much petroleum exists in the planet was already given by nature way back in geologic times. Although estimates might vary among geologists there seems to be reasonable agreement that we are near the midpoint in the utilization of our total petroleum resources. In addition, there is little doubt that the second half of the hydrocarbons existing in nature will be more costly to extract and, if demand is not drastically curtailed, it will take much less time to be drained than the first half. The time that these resources will last, at the current rate of utilization, is of the order of 50-70 years.

The technological component.

Technology will have the last word on the speed at which alternative sources of energy become commercially feasible. Some of these alternative sources, such as nuclear, wind, solar and ethanol, are already in different stages of commercial use. Others such as hydrogen are in a stage of large-scale experimentation. Technology, however, is intimately related to economics and politics. Until the numbers are right for investors or political leaders are convinced that strong policy decisions should be taken, the replacement of petroleum and gas by other forms of energy will not take place in force. Political and economic inertia will promote the delay in the use of alternative fuels, while environmental considerations will tend to accelerate this use.

Vcrisis