What Matters: January 2004
Kicking the Oil Habit
Vijay V. Vaitheeswaran '90
Who can forget the oil shocks of the 1970s? Turmoil in the Middle East and an Arab embargo sent oil prices skyrocketing. The global economy was knocked sideways by the oil-fired inflation stoked by the market manipulations of the Organization of Petroleum Exporting Countries-and, it must be noted, the foolish policies such as price controls adopted by some Western governments in response. Pundits agreed that oil prices would only rise ever higher, pointing to evidence that suggested the world was running out of oil. Even hard-nosed energy forecasters, such as those at Exxon and at America's Department of Energy, published forecasts that predicted that oil prices would shoot above $100 a barrel by 2000.
Clearly, these fears were misplaced. Though not every expert agrees, the specter of hydrocarbon scarcity has been largely debunked-especially if one considers the vast energy content of "unconventional" hydrocarbon sources such as Canada's tar sands. The level of proven reserves of conventional oil is actually higher today than it was three decades ago. Oil prices have been not $100 a barrel of late but $25 to $30-and even collapsed to $10 briefly in 1998.
However, the fact that cries of shortage and crisis have been debunked does not mean that all is well in the energy world. Quite the contrary: there are good reasons to think that the current energy system is both undesirable and unsustainable. The needlessly dirty and inefficient ways in which we use energy are the most important ways in which mankind fouls the natural environment. Whether it is the felling of forests for wood fuel or the burning of fossil fuels in filthy ways, our energy use today contributes to global warming and to local air pollution-both environmental problems with important health implications, especially for children and for the world's poorest people.
The human misery involved alone justifies a transition to a cleaner energy model, but there is another problem that may prove more compelling to politicians: the growing political and economic cost of reliance on petroleum. It is now clear that the main problem with our petro-addiction is not oil's scarcity, but its concentration in the hands of unstable, unsavory and unreliable regimes in the Middle East.
The central rebuttal to this concern, usually offered by the oil industry, is that the dramatic advances in oil exploration and production is unleashing a wave of investment in non-OPEC areas like Russia, West Africa and Brazil. It is even helping Canada develop its mucky tar sands. All this may well give the consuming world a couple of decades' worth of breathing space before it once again has to worry about oil shocks.
But does today's technological revolution in oil really add up to an OPEC antidote that will render Saudi Arabia irrelevant? The short answer is "no," for much the same reason that the rise of Russia and other non-OPEC exporters will also not dislodge the Saudis from their perch atop the oil economy: improving technology will debunk claims that we are about to run out of oil, but it will never be able to change where on earth God put the oil in the first place.
Fully a quarter of the world's conventional reserves of oil are found under the parched expanses of Saudi Arabia. No other country comes even close. Four neighbors-Iran, Iraq, Kuwait, and the United Arab Emirates-each have about a tenth of the world's reserves. Taken together, then, this volatile corner of the world sits atop two-thirds of the world's oil. Scrutinize the long-term forecasts by the International Energy Agency and other respected forecasters, and you will find that they predict that oil exports from the Middle East—and especially from Saudi Arabia—will increase sharply over the next twenty years even assuming that Big Oil spends hundreds of billions to develop non-OPEC areas.
The only way to escape this trap is to develop a radically different way of powering our cars and buses that challenges oil's monopoly grip on transportation. Some see precisely such a disruptive innovation emerging in the form of fuel cells, an environmentally friendly technology that uses hydrogen fuel to power cars. Of course, hydrogen is not an energy source! Rather, it is like electricity, which must be made from some primary energy course.
The reason to bother doing this is that hydrogen—like electricity—offers a convenient and emission-free way to enjoy energy services like heat, light and mobility. Since the hydrogen required could be made from many different primary energy sources, ranging from renewables to nuclear power to hydrocarbons like coal, it will also bolster energy security by making it possible for the first time to envision a transportation system without oil. Indeed, that is why visionaries think hydrogen fuel cells could eventually dislodge the iron nexus of the internal-combustion engine and gasoline.
Will it happen? Only time will tell, though the billions now being spent by carmakers and oil giants on this technology suggests that hydrogen and fuel cells are on the way. But their advance to commercialization will surely be hindered by the fact that consumers in America (the world's largest gas guzzler) pay so little in energy taxes that gasoline is often cheaper than fizzy water.
Unless the United States is willing to consider the hidden costs involved in its addiction to petroleum-ranging from the harm done by hydrocarbon combustion to human health and the environment to at least part of the cost of keeping troops in the Middle East-the world is unlikely to move beyond fossil fuels anytime soon. In a couple of decades, the world would find itself still addicted to fossil fuels but with no commercially viable alternatives to petroleum on hand. It is surely time to start kicking this habit.
Related Articles
"A Call to Arms: A Manifesto for Tackling Global Warming and Oil Addiction," by Vijay V. Vaitheeswaran '90
About the Author
Vijay V. Vaitheeswaran '90 is the global environment & energy correspondent for The Economist and author of Power To The People: How the Coming Energy Revolution Will Transform an Industry, Change Our Lives, and Maybe Even Save the Planet, which is available at most bookstores and at vijaytothepeople.com.
What Matters is a guest opinion column written by a different MIT alumnus or alumna. The views expressed are entirely those of the author and do not necessarily represent the views of the Alumni Association or MIT. Interested in writing a column? Email whatmatters@mit.edu.
