Voracious oil consumers should prepare to cut back – or pay

World oil demand is projected to reach 90 million barrels per day (bpd) before the end of this decade. The United States, non-OECD countries, Asia and other emerging economic powers are expected to keep up their thirst for energy at unbelievable growing levels, while oil extraction in the near future will not keep pace. This increasing energy demand poses tremendous challenges, while the price of crude, without oil shocks or embargoes, has hovered around $68 per barrel lately.

The current energy hunger, supply crunch and price spikes are the consequences, on the one hand, of inadequate production, refining capacity and crude availability on the world market. This is compounded by insufficient infrastructure in the amount of existing networks of pipelines, new supply routes or liquid natural gas (LNG)-receiving terminals, limited boundary connections for supply routes, and maintenance of the aging infrastructure. On the other hand, not having sufficiently developed or diversified alternative energy resources such as shale oil, a new generation of nuclear power, tar sands, hydrogen, clean-coal technologies and renewable resources such as solar, wind, hydro and bio-fuels is also contributing to the challenges facing the energy sector.

With regard to nuclear power, the last U.S.-India nuclear protocol will definitely help but does not solve all of the issues. Nuclear power alone cannot solve all of the energy inadequacies because it does not address the needs of transportation and other sectors.

A drive to reduce dependence on oil and gas should be assessed first in order to plan and execute short-term and long-term solutions. It can start by giving a mandate to U.S. and European car manufacturers to reduce manufacturing cars with high gas consumption, promoting energy-conservation measures and energy efficiency across the world. The energy users in Europe, the U.S. and Asia should be determined to reduce their consumption, introduce energy-efficient instruments and encourage clean development mechanisms. According to a World Bank estimate, in Africa alone, using the total flared gas in power production could generate over 20,000 megawatts. Another example that encourages consumption is the tax on gasoline in the U.S., which is the lowest compared to any other OECD country. Meanwhile, the U.S. Senate passed an $18 billion bill last year in tax incentives to promote further exploration and production (E&P). These incentives should also address the large polluting utilities to invest in their plants to reduce carbon dioxide emissions. Tax incentives need to be introduced by all policymakers across the continents for solar, wind and other renewable energy industries.

Daily Star