Bottomline Decisions: Concerns about reliable supply will always trump the call for cleaner energy
Securing supply tops the energy-policy agenda. That is the message coming loud and clear from more than 60 energy-industry leaders, including big-company CEOs and senior government officials, recently surveyed by the World Economic Forum. Geopolitical unrest from Iraq to Nigeria and Russia to Venezuela, cuts in estimated reserves at Shell and concerns about a decreasing rate of new oil discoveries have driven oil prices to record heights. The 1970s oil shocks had a permanent impact on oil prices and the same may be true today—reason enough to focus on securing supplies and finding alternatives to oil.
The security concern forces tough choices. History shows that policymakers will put price and supply before social and environmental concerns. This follows the basic rules of Maslow's Pyramid, the famous device American psychologist Abraham Maslow invented in the 1950s to explain the motivations of a healthy person. As Maslow put it, a healthy person lacking food, love and esteem "would most probably hunger for food more strongly than for anything else." Sounds simple, but this idea goes a long way toward explaining the current comeback of socially and environmentally controversial energy sources, particularly coal, nuclear and large-scale hydro.
Signs are everywhere. The Bush administration's energy plans will advance research on nuclear technology and clean coal. China plans to increase nuclear-power generation from 1.5 percent today to 4 percent by 2020. France's state-run power company, EdF, has just reconfirmed its commitment to build a forerunner to the European Pressurized Water Reactor. Plans for the Grand Inga Dam, a massive new plant on the Congo River, reflect reviving worldwide interest in big hydro.
Geopolitics drives these trends. Nuclear fuel can be stored very efficiently, coal is found in abundance on all the continents, and hydro is a local resource, so all are shielded one way or another from political turmoil. Similar considerations are forcing a rethinking of natural gas, long the poor cousin in the energy family. Qatar's second deputy prime minister, Abdallah bin Hamad al-Attiyah, says his country was disappointed to discover natural gas rather than oil in the 1980s, and took 20 years to realize its value. Now the decreasing cost of liquefying natural gas is making it easier to ship, turning it into an increasingly global and valuable commodity.
Often, security fears and environmental concerns push in opposite directions. Nuclear energy and natural gas benefit from the climate-change debate, coal and nuclear from energy-security concerns. Natural gas is gaining ground in part because it is clean-burning, yet it faces geopolitical security concerns similar to oil's: more than 40 percent of the resources are concentrated in Russia, Qatar and Iran.
As long as supply security dominates the policy agenda, international agreements on higher-order issues, including the Kyoto Protocol on climate change, will face hurdles. Countries that have not secured an affordable electricity supply will look for cheap solutions before committing to an environmental agenda. Building coalitions of those willing to promote clean energy—most likely, among those who can afford it—may have more immediate impact.
As Maslow foretold, people will worry about putting food on the table before they worry about how clean the plates are. Indira Gandhi eloquently captured this idea as it applies to energy when she called poverty the ultimate pollutant. If dirty forms of coal are all people have, that's what they will burn. All too often greens push costly high tech when simple solutions hold more promise. For example, Hussain Sultan, CEO of the Emirates National Oil Co. and a member of the forum, has suggested that liquefied natural gas sold through an existing corporate distribution system like the one run by Coca-Cola, which already reaches some of the most remote spots on the planet, could help fill the demand for energy quickly, cheaply and relatively cleanly.
Supply is thus a priority not just for Big Oil CEOs. To achieve their goals, environmentalists should put supply first, too, because when push comes to shove, energy security will trump all other issues.
Frei is the associate director for energy industries at the World Economic Forum.
© 2004 Newsweek, Inc.
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