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Q&A: The Future Of Energy

Experts generally agree that our current reliance on fossil fuels is unsustainable. Clean energy sources like wind and solar power--not to mention still-unproven hydrogen technology--are gaining popularity, especially in Western Europe. But even as prices approach $50 a barrel, the alternatives don't yet make enough economic sense to replace oil. Will that change? What are the most promising innovations to use alternative energy sources? And what about hybrid options like `green' gizmos and the popular Toyota Prius? You wrote to us with queries about the future of energy. Here are the responses to some of those questions from Newsweek Middle East regional editor Christopher Dickey and Forbes.Com editor Paul Maidment.

Tacoma, WA: Will the move to alternate energy sources destroy the economies of the Middle East oil exporters? How might they respond?

Paul Maidment: Probably not in our lifetimes; and I say that without knowing how young you might be. The world will be using fossil fuels for many a year to come. Crude oil is not just used for making gasoline that goes in cars. It is used in the petrochemicals industry, for heating oil and aviation fuel, and to power electricity generation. And we really don't know how much oil there really is in the Middle East. Much of the region's reserves are still unexplored. Some experts say there is actually twice the known level of reserves in the Middle East. The alternatives are mostly offshore fields in deep water, from which it is expensive to extract the crude. Political instability in the Middle East is a far bigger threat to the existing regimes than alternative energy sources.

Christopher Dickey: The most likely response of the Middle East oil exporters will be to invest more money to increase their production capacities, and thus bring prices down to the point where alternatives aren't competitive. They've done this several times before. But such structural investment takes a long time to achieve results, it has been slow getting under way, and if high prices endure for several more years, alternatives could become increasingly attractive, even unstoppable. A major shift away from fossil fuels would wreak havoc on the economies of Middle Eastern producers. But it's more likely we're going to see a declining demand in developing countries, matched by a booming demand in China and the developing world, which will keep Earth addicted to gas and oil for the foreseeable future.

Bothell, WA: Why is the United States lagging behind other countries in these endeavors (switching to automobiles fueled by alternative energy sources)? How about a hydrogen economy?

Maidment: The U.S. automobile market is very driven by what consumers want--and Americans haven't shown much demand for non-gasoline-engined vehicles or much desire to trade their cars for public transport. (In Europe, for example, many city and regional governments do push to use buses and light rail systems powered by alternative energy sources, thus creating a market for vehicles using them). Most American motorists don't see any benefit in making the switch. Gas is so cheap in the U.S. compared to other rich countries, that they don't see much in potential fuel savings. Until those things change, Detroit won't rush to mass market anything but what it knows will sell today.

On hydrogen fuel cells, they have the potential to solve several economic and environmental challenges: America's dependence on petroleum imports, poor air quality, and greenhouse gas emissions. But they are a long way from being in everyday use. They are far more expensive than gasoline at the moment, there are still technical problems to solve to make them be more durable and dependable, and there are storage problems to overcome. Hydrogen takes up a lot of space for the energy it generates. It is difficult to make a tank that would contain enough hydrogen usefully to run a fuel cell that would fit in a car. High pressure storage tanks are one of the things the automakers are working on.

Dickey: The United States has just about the cheapest gasoline in the industrialized world. In Japan and most Western European countries the price at the pump is three times higher or more. That's largely due to government taxes that are intended to limit consumption--and they do. Outside the USA the public has a much greater incentive to demand better gas mileage, and is more likely to buy the cars that deliver it. That said, in Europe and Japan as well as the United States, the practical emphasis of research and development is likely to remain on improving the efficiency of conventional fuels rather than switching to entirely new ones. Those who emphasize hydrogen over, say, hybrids tend to be dreaming about a distant future at the expense of concrete solutions today.

Omaha, NE: Do you think that Ford and GM are stonewalling on the hybrid car? Why are these U.S. automakers not making them if Toyota has a big waiting list for the Prius?

Dickey: They're not stonewalling, just cautious. Ford and GM only began investing in hybrid cars when the U.S. Department of Energy began to offer them money to do so. Also, insofar as the U.S. market is concerned, Toyota is gambling that energy prices--and the political uncertainties of the Middle East--will stay high. But at least since 1973, sporadic American passions for conservation prompted by surges in Mideast violence and related jumps in oil prices, have proved very short lived. Remember "compact cars"? Remember the 55-mile-an-hour speed limit? Car manufacturers who bet on those trends were left with a lot of little runabouts nobody wanted when gas prices went down again. American cars came back bigger, bolder and just about as thirsty as ever. In the USA today, the SUV culture makes the tailfin era of the 1950s look positively green. So Toyota's Prius may or may not succeed over the long term in the American market, which is key to Ford or GM. But in other countries with higher gas prices, it will continue to hold great promise.

Maidment: I think Ford and GM are moving at a pace they think appropriate for the American market. They don't see a mass demand for hybrid cars yet, but are positioning themselves for when it arrives. GM is building hybrid versions of its Chevrolet Silverado and GMC Sierra trucks, using a stripped down version of technology it currently runs in its Allison buses that you can see on transit routes in some dozen U.S. cities. And it has more hybrids planned for the future.

Remember, hybrids are more expensive for car makers to build. They require two motors; an electric one along with a conventional gasoline one. That additional cost gets passed onto car buyers. The Prius is fairly expensive for its size and comfort level. Just look around at auto dealers' advertisements to see what sells all but luxury cars in the U.S. It's price.

It is true that sales in the U.S. of Toyota's redesigned Prius, introduced last year, have been brisk, though the original model introduced in 2000 got off to a slow start. Toyota is raising its Prius production capacity from 120,000 to 180,000 (all built in Japan) and much of that increase is likely to find its way to the U.S. to help reduce those long waiting lists you mention. But even if Toyota sold them all here, that would still be barely 1% of the total market. Toyota is also looking into building hybrids in North America, either the Prius or one of its coming hybrid SUVs, the Highlander or the Lexus RX400h. If that happens, I think you will see Detroit respond more assertively.

Upland, Calif.: What is the latest on the "strong" hybrids that can be switched to run on electricity or fuel? I hear these class of hybrids would be able to run around town at speeds of say 35 to 40 mph on electricity and not go to fuel unless it had to run at higher speeds for a long distance trip. Are these going to be made any time soon?

Maidment: They are coming to market. GM has slated for 2007 "strong hybrid" versions of its Chevrolet Tahoe and GMC Yukon SUVs, again based on the hybrid technology used in Allison buses, but a fuller version than it is using in the Silverado and Sierra, so they should both have more power and better fuel economy. GM is likely to be beaten to market by DaimlerChrysler, which may have strong hybrid Dodge Ram on sale as early as next year. Ditto Ford with its Escape, whose fuel economy, the company says, will range from 35 to 40 mpg in the city.

Dickey: By 2007, there should be 22 hybrid car options in the U.S., and some of these will have the strong hybrid qualities. The Toyota Prius, available now, also counts as a strong hybrid.

New York: How likely do you think it is that gas will overtake oil as the world's top fuel of choice by 2025? With oil companies like Shell and Exxon Mobil behind the move to natural gas, I'd imagine we could reach that milestone even earlier. How does natural gas consumption compare to oil consumption in the U.S. now?

Dickey: Projections by Shell and other companies suggest oil and gas will be running neck and neck by 2025, but most of the growth in the natural gas market will be coming from electrical power generation and industrial plants. Use of compressed natural gas or gas converted to liquid fuel to run cars and trucks is likely to be much more limited.

Maidment: I don't know that gas will necessarily overtake oil as the world's most used fuel by 2025, but it will probably close the gap, particularly as electricity generation moves away from oil to gas, coal and alternative fuels. Use of both gas and oil will increase over that time, so the question is which will increase the faster. In the U.S. now, three units of energy come from gas for every five from oil. One thing that is holding back the greater use of liquefied natural gas is the opposition from local communities to building new terminals and storage facilities.

Boston: Critics say that wind power is unlikely to account for more than one percent or so of the world's energy anytime soon. Why is that? Why aren't the United States and other countries putting more resources into developing this environmentally friendly source of energy?

Maidment: Theoretically, there is enough wind in the U.S. to generate all the electricity the country uses twice over. Yet, as you, say, it accounts for a tiny percentage of actual power generation. Reasons? It is currently cheaper to generate power from natural gas. You can't be sure the wind will blow steadily, constantly and strongly--which is a problem for utilities who need a reliable supply of power. The windiest places are often far from where the power is needed, or even transmission lines to connect to. Wind energy projects tend to have high initial capital costs--which makes the power generated expensive. Local communities and environmentalists often don't want banks of giant wind turbines towering over the landscape. The good news though is that the cost of wind-generating equipment is falling and performance improving. A good example of somewhere wind power is working is Denmark. There, farms band together cooperatively to generate power, pulling off the grid when they need to and selling back into it when they generate excess power. It is common to see just three or four windmills in groups there. And in the capital, Copenhagen, there is a large offshore wind farm. Along with Denmark, Germany, the Netherlands, Spain, India and China are the countries most investing in wind power.

Dickey: [However] in Holland and other countries with steady winds, the enormous lines of hi-tech turbines erected near the sea have presented some environmental as well as technical difficulties. These are not quaint structures for people in wooden shoes, they're huge propellers rotating at high speed, and, like so many other sources of energy, both conventional and alternative, many people don't want them in their back yard.

Flower Mound, TX: Do you think that fossil fuels will continue to generate the bulk of electricity in the United States and other western countries for the foreseeable future? And, if so, do you think most will come from nuclear plants--or from gas and oil? Why haven't alternative sources like solar and wind power gained more support?

Dickey: I do think fossil fuels will continue to be the world's primary source of energy for at least the next half-century. Nuclear energy may make some inroads. In France, it accounts for some 80% of electric power generation. But public opposition is so high, it's doubtful to expand rapidly. Solar and wind power, when put to the test, can supplement energy needs, but they cannot replace fossil fuels without also changing the energy-wasting way almost all of us live.

Maidment: I agree that fossil fuels will remain the predominant source of power in the industrialized and industrializing world for the foreseeable future. Countries like the U.S. and China need vast quantities of power to keep their economies going. Today, they can generate that power more cheaply from oil, gas and coal than they can from wind, wave or solar power. If technology can make alternative fuels cheaper, more reliable and abundant sources of power, then those will displace fossil fuels. But that day isn't to hand yet.

Nuclear fuel is an interesting question. On an operating basis, it is a cheap way to generate electric power, and is much used in countries such as France and Japan. A true accounting--including the cost of building and decommissioning a nuclear power plant--changes that. But more important for the nuclear power industry are the safety and proliferation issues. Nuclear plants are cleaner and safer than conventional fuel plants--until they go wrong, when they go wrong catastrophically. And the closeness of nuclear power generation to weapons programs in some countries casts a whole different layer of issues over the industry.

Bangor, North Wales, U.K.: It should be pointed out that unlike wind and solar, hydrogen does not generate clean energy. At best it is a (possibly clean) battery, which can be used to transport energy from another source. Although, for cars, one would have to solve a myriad of problems, not least the problem of its volume.

George Bush is either very clever or very stupid. Stupid because by investing in hydrogen he hasn't realized this. Clever because he knows this detracts people from investing in options that would yield results much quicker, such as improving car efficiency, hybrid engines, smaller cars, better public or mass transport as well as wind and solar power. Thus assuring we need oil for a long time to come. Your comments please.

Maidment: I shall let you be the judge of whether George Bush is either very clever or very stupid. All I will say is this: There is clearly a large and vested interest in the U.S. in oil. But markets have a way of breaking oligopolies. When technology makes other sources of power economically competitive, and when consumers demand them, voting for more fuel efficient cars, more public transport or more energy efficient products with their pocket books, then things will change. Oil can't fuel all the people all the time.

Dickey: Few politicians think far beyond their next election campaign, and, as we've seen, no major American candidate has been willing seriously to impose the taxes and regulations that could force the public to change its wasteful consumption habits. So it's politically smart to tell folks the theoretical future is bright--but sometime after the end of the second term--while doing as little as possible to rock the boat in the meantime.

Christopher Dickey has served as Newsweek's Middle East regional editor since 1993 and as Paris bureau chief since 1995. He reports on European politics, economy, society and new technologies, as well as developing stories throughout North Africa, the Near East and the Persian Gulf. He plays a key role in Newsweek's coverage of the war on terror and writes the weekly Shadowland column for the magazine's Web site. Dickey joined Newsweek in 1986 from The Washington Post, where he had served as Cairo bureau chief, Mexico City bureau chief, a metro reporter, managing editor of The Washington Post Magazine and assistant editor and columnist of the paper's Book World section. Dickey's nonfiction books include Summer of Deliverance, Expats and With the Contras. His latest novel, The Sleeper, was published on Sept. 7. Dickey also joined us for a Live Talk on hybrid energy sources.To read the transcript, click here.

Paul Maidment joined Forbes in January 2001 in a dual position as editor of Forbes.com and executive editor of Forbes magazine. During his editorship, Forbes.com has become the No. 1 business news Web site. Maidment has also launched a stream of groundbreaking features and services, including Forbes.com Business News Alerts, the Forbes.com Video Network, the members-only Forbes.com CEO Network, customized home pages for Europe and Asia, and, most recently, Infoimaging @ Forbes.com. This new section covers the convergence of information technology and imaging science, a first of its kind on the Web. Previously, Maidment was the founding editor of FT.com, the Financial Times' award-winning Web site. He held senior editorial positions at Newsweek and at The Economist, and started his career with the Asian edition of The Wall Street Journal and in radio and television with the BBC in Hong Kong.

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