Wrestling in oil

Why is the price of oil rocketing and how far can it rise? The Economist says that, in the search for scapegoats, there will be many candidates, but the most likely explanation is that there is a shortage in refining capacity and the process to find and exploit new sources is a long and expensive one. Others support this explanation, but is this all there is to it? Finding a scapegoat might be tempting, but how do we get a grip on the problem - wrestling in oil?

Oil dependence

After the first oil-shock, the IEA was created with the aim of making the world less dependent on oil. To do so, the industrialised countries should exchange information, pool storage capacity and develop technologies. By doing this, we should eventually cease our dependance and will not have to face more severe disruptions than we can handle. So, is the IEA to blame? Have they not done their job properly?

On the contrary, they have done an excellent job. Even if not all the good development in developing new resources and more efficient technologies can be attributed to the IEA and their 40+ Programmes (the so called Implementing Agreements), with more than 5,000 experts working on the alternatives daily, their work is certainly contributing to the solution rather than the problem.

The rise in welfare could be a sand-castle

The answer to the scapegoat question might have to be a more embarrassing one than suggested by The Economist. It might be that we have to blame ourselves as individuals!

Just look at the picture showing how important the energy efficiency improvements have been for our standard of living.

If we had remained with technology as it was in the beginning of the 70’s, we would have had to use more than 50% more energy today. That would hardly be possible from an economic point of view, and therefore it is justified to say that the rise in welfare we have seen since the 70’s was dependant on efficiency improvements and NOT in the use of more energy (note that this holds for industrialised countries and not necessarily for developing countries).

But does this figure not also show that the welfare is a castle made of sand when we are so vulnerable to rocketing oil-prices? It would have been possible to use the improvements to reduce the use of energy instead!

At the end of this week, the IEA will publish the Energy Technology Perspectives 2008. We could read it and learm of discussions about technologies and economy, as usual. We could also read it and try to understand the basic message and what it means to us on a personal basis! Dare we do it?