A Brief Energy Outlook for the XXI Century

Lorca-Susino, Maria (2008): A Brief Energy Outlook for the XXI Century. Published in: The Jean Monnet/Robert Schuman Paper Series , Vol. 15, No. 8 (August 2008): pp. 1-18.

Abstract

The price of oil has surged five-fold since 2003. A variety of factors are used to explain this: turbulence in the Middle East and rising demand in emerging economies such as India and China are the most common ones. In fact, the latest World Economic Outlook (WEO) from the International Monetary Fund (IMF) has declared that the Chinese and Indian economies “account for more than 90 per cent of the rise in consumption of oil products and metals, and 80 per cent of the rise in consumption of grains since 2002.” On Thursday, June 26, 2008, the price of oil broke the all time high of $140 per barrel. The Organization of Petroleum Exporting Countries (Opec) predicted that this summer the price of oil will range between $150-170 per barrel. This extraordinarily high price has a detrimental impact on an already fragile world economy, forcing governments to work desperately to find alternatives to help reduce the high energy bill for their economies and people. According to some experts, one of the most efficient alternatives is bio-ethanol obtained from corn and sugar cane. However, the production of bio-ethanol raises two concerns: One is a trade-off between arable land to grow food or to grow the source for bio-ethanol. The second has to do with the ecological damage associate with growing sugar-cane. However, Brazil proves these two concerns wrong. Brazil has the most successful bio-ethanol program in the world and has obtained its energy independence at no high environmental or food production cost. Brazil’s success story is closely followed by the EU, US, UK, and even China. Furthermore, there are other energy alternatives such as nuclear energy, which in France covers 75% of the national electricity demand. Additionally, there are others sources of energy like the sun, the wind, and the sea that provide free (beyond the generating equipment) and abundant energy, but which require government investment in terms of start-up subsidies to develop them. Unfortunately, despite the exorbitant current price of oil and the inspiring example of Brazil, governments continue to look for new petroleum resources, rather than new energy alternatives. For example, Cuba recently announced that is has new oil reserves twenty miles north of Havana, and European companies have been the first ones to bid for exploration rights. Lately, Florida Governor Crist has announced that he might change its policy regarding oil exploration off the Florida Cost. This demonstrates that governments still are not fully aware of the great risk globally as a result of the dependency on oil. It seems that a situation similar to that causing “The Great Smog of 1952” in London would have to occur for governments to take the search for new energy sources seriously.

• Item Type: MPRA Paper
• Language: English
• Keywords: Oil, Price of crude,
• Subjects: A - General Economics and Teaching > A1 - General Economics; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

References

1. World Economic Outlook, “Housing and the Business Cycle,” International Monetary Fund, April 2008. http://www.imf.org/external/pubs/ft/weo/2008/01/pdf/text.pdf (Accessed on June 23, 2008)

2. Maria Lorca-Susino, “The US dollar and the Euro : Deus Ex-Machina,” European Union Miami Analysis (EUMA), Vol. 5, No. 9, April 2008. http://www6.miami.edu/eucenter/LorcaFX-MP%20Theory%20Edi.pdf 3. The Association Press, “Iran planning to stop using U.S. dollar to price oil, central bank governor says,” The International Herald Tribune, March 28, 2007. http://www.iht.com/articles/ap/2007/03/28/business/AS-FIN-Malaysia-Iran-Oil-Dollars.php (Accessed June 20, 2008) 4. EFE, “Portugal al borde del colapso,” El Mundo, June 11, 2008. http://www.elmundo.es/mundodinero/2008/06/11/economia/1213194521.html (Accessed June 20, 2008) 5. Times, “Another Crisis for the Shah”, November 13, 1978. http://www.time.com/time/magazine/article/0,9171,946149,00.html 6. National Bureau of Economic Research, “January 7, 2008 Memo from the Business Cycle Dating Committee.” http://www.nber.org/cycles/main.html (Accessed June 21, 2008) 7. CBC News, “The Oil of Price. Marching to $100?” July 18, 2007. http://www.cbc.ca/news/background/oil/ (Accessed June 16, 2008) 8. National Bureau of Economic Research, “January 7, 2008 Memo from the Business Cycle Dating Committee.” http://www.nber.org/cycles/main.html (Accessed June 21, 2008) 9. George Wright, “Wolfowitz: Iraq war was about oil,” Guardian, June 4, 2003. http://www.whatreallyhappened.com/aboutoil.htm (Accessed June 20, 2008) 10. Commission of the European Communities, “An EU Strategy for Biofuels,” Communication from the Commission, Brussels, February, 2006 http://ec.europa.eu/agriculture/biomass/biofuel/com2006_34_en.pdf 11. Jorn Madslien, “Biofuel Raises Global Dilemmas,” BBC News, January 17, 2006. http://news.bbc.co.uk/1/hi/business/4603272.stm (Accessed June 15, 2008). 12. U.S. Department of Energy, “President Bush Signs H.R. 6, the Energy Independence and Security Act of 2007,” The White House, December 19, 2007. http://www.whitehouse.gov/news/releases/2007/12/20071219-6.html (Accessed June 24, 2008). 13. U.S. Department of Energy, “Utilities to Join DOE's Plug-In Hybrid Efforts,” Energy Efficiency and Renewable Energy, June 20, 2008. http://www.eere.energy.gov/news/daily.cfm/hp_news_id=121. (Accessed June 25, 2008) 14. Euroactive, “Green Cars,” Policy Section, August 17, 2004. http://www.euractiv.com/en/sustainability/green-cars/article-117504 15. Ladene Nasseri and Mathew Brown, “Kuwait Says Oil Over $100 Is too High; Support Saudis,” Bloomberg.com, http://www.bloomberg.com/apps/news?pid=20601087&sid=aJoz82F86Wis&refer=home (Accessed on June 30, 2008)

16. Official Energy Statistics from the U.S. Government Energy Information Administration, “A Primer on Gasoline Prices,” Energy Information Administration Prices, Brochure #: DOE/EIA-X040, May 2008. http://www.howstuffworks.com/framed.htm?parent=gas-price.htm&url=http://tonto.eia.doe.gov/cfapps/STEO_Query/steotables.cfm?periodType=Annual&startYear=2005&startMonth=1&endYear=2009&endMonth=12&tableNumber=9 (Accessed June 13, 2008) 17. Bruce Crumley, “Think Gas is High? Try Europe,” Time, May 28, 2008. http://www.time.com/time/world/article/0,8599,1809900,00.html (Accessed June 14, 2008). 18. Larry Rohter, “With Big Boost from Sugar Cane, Brazil is Satisfying its Fuel Needs,” The New York Times, April 10, 2006. http://www.nytimes.com/2006/04/10/world/americas/10brazil.html (Accessed June19, 2008) 19. Associate Press, “G-8 Raises Alarm over Rising Oil Prices,” msnbc.com, June 14, 2008. http://www.msnbc.msn.com/id/25164953/ (Accessed June 20, 2008) 20. Andrew England and Carola Hoyos, “Saudi Oil Boost Fails to Alleviate Concerns,” Finacial Times, June 22, 2008. http://www.ft.com/cms/s/0/9c2756b4-4035-11dd-bd48-0000779fd2ac.html (Accessed June 22, 2088). 21. Associate Press, “G-8 raises alarm over rising oil prices,” msnbc.com, June 14, 2008. http://www.msnbc.msn.com/id/25164953/ (Accessed June 20, 2008). 22. “Nigerian Attack Closes Oilfield,” BBC News, June 20, 2008. http://news.bbc.co.uk/2/hi/africa/7463288.stm (Accessed June 20, 2008). 23. “'Deadly attack' in Angola enclave,” BBC News, March 7, 2008. http://news.bbc.co.uk/2/hi/africa/7282971.stm (Accessed June 19, 2008)

24. Mother Earth News, “Jerry Friedburg on Harold Bate,” June 1972, http://www.motherearthnews.com/Green-Transportation/1972-05-01/Jerry-Friedberg-on-Harold-Bate.aspx 25. Larry Rohter, “With Big Boost from Sugar Cane, Brazil is Satisfying its Fuel Needs,” The New York Times, April 10, 2006. http://www.nytimes.com/2006/04/10/world/americas/10brazil.html (Accessed June19, 2008) 26. Murry Tarmers, “Distinguishing Between ‘Bio-ethanol’ and Petroleum Ethanol,” Ethanol Producer Magazine, June 2006, http://ethanolproducer.com/article-print.jsp?article_id=2077 (Accessed June 26, 2008) 27. Larry Rohter, “With Big Boost from Sugar Cane, Brazil is Satisfying Its fuel Needs,” The New York Times, April 10, 2006. http://www.nytimes.com/2006/04/10/world/americas/10brazil.html?_r=1&sq=Bush%20Brazil%20ethanol&st=nyt&oref=slogin&scp=5&pagewanted=print (Accessed June 24). 28. Larry Rohter, “With Big Boost from Sugar Cane, Brazil is Satisfying its Fuel Needs,” The New York Times, April 10, 2006. http://www.nytimes.com/2006/04/10/world/americas/10brazil.html (Accessed June19, 2008) 29. Larry Rohter, “With Big Boost from Sugar Cane, Brazil is Satisfying its Fuel Needs,” The New York Times, April 10, 2006. http://www.nytimes.com/2006/04/10/world/americas/10brazil.html (Accessed June19, 2008) 30. Richard Doornbosch and Ronald Steenblik, “Biofuels: Is the Cure Worse than the Disease?” Organization for Economic Co-operation and Development, Round Table on Sustainable Development, Paris, 11-12 September 2007. http://media.ft.com/cms/fb8b5078-5fdb-11dc-b0fe-0000779fd2ac.pdf (Accessed June 25, 2008) 31. Food and Agricultural Organization,” The Rise in Crude Oil Prices Stimulates Ethanol-Related Demand for Agricultural Commodities.” http://www.fao.org/es/esc/en/15/106/highlight_107.html (Accessed on June 22, 2008) 32. Noam Chomsky, “Starving the Poor,” Khaleej Times, May 15, 2007. http://www.chomsky.info/articles/20070515.htm (Accessed june18, 208) 33. Directorate C. Markets in crop Products, “A Description of the Common Organisation of the Market in Sugar,” European Commission, Agriculture Directorate-General, September 2004. http://ec.europa.eu/agriculture/markets/sugar/reports/descri_en.pdf (Accessed on June 23, 2008) 34. World Nuclear Association, “Chernobyl Accident.” http://www.world-nuclear.org/info/chernobyl/inf07.html 35. Exxon Valdez in Alaska in 1989, or the Prestige in Spain in 2002 36. World Nuclear Association, “Nuclear Power in France.” http://www.world-nuclear.org/info/inf40.html (Accessed on June 27, 2008) 37. World Nuclear Association, “Nuclear Power in Germany.” http://www.world-nuclear.org/info/inf43.html (Accessed on June 27, 2008) 38. World Nuclear Association, “Nuclear Power in Finland.” http://www.world-nuclear.org/info/inf76.html (Accessed on June 27, 2008) 39. World Nuclear Association, “Nuclear Power in UK.” http://www.world-nuclear.org/info/inf84.html (Accessed on June 27, 2008) 40. World Nuclear Association, “Nuclear Power in Spain.” http://www.world-nuclear.org/info/inf85.html (Accessed on June 27, 2008) http://www.libertaddigital.com/noticias/kw/agua/co/emisiones/energia/kioto/nuclear/renovables/kw/noticia_ 1276333010.html 41. La Moncloa, “España y Francia firman un acuerdo histórico que duplica la interconexión eléctrica entre ambos países,” Presidencia del Gobierno, June 27, 2008. http://www.la-moncloa.es/ActualidadHome/2008/270608AltoNivel.htm. (Accessed on June 28, 2008) 42. AP, “EU to Drop Sanctions Against Cuba,” CBS News, June 20, 2008. http://www.cbsnews.com/stories/2008/06/20/world/main4197938.shtml?source=RSSattr=HOME_4197938 (Accessed June 25, 2008) 43. MSNBC News Services, “EU agrees to lift sanctions on Cuba,” MSNBC.com, June 19, 2008. http://www.msnbc.msn.com/id/25272269/#storyContinued (Accessed June 24, 2008) 44. Marc Frank, “Raúl Castro's Cuba remains keen to foster a statist economy,” Financial Times, June 24, 2008. http://www.ft.com/cms/s/0/54f51c20-4186-11dd-9661-0000779fd2ac.html (Accessed June 25, 2008). 45. Marc Frank, “Raúl Castro's Cuba remains keen to foster a statist economy,” Financial Times, June 24, 2008. http://www.ft.com/cms/s/0/54f51c20-4186-11dd-9661-0000779fd2ac.html (Accessed June 25, 2008). 46. China Daily, “China Enlarges Bio-ethanol Fuel Coverage,” Chinadaily.com, April 1, 2008. http://www.chinadaily.com.cn/china/2008-04/01/content_6582660.htm (Accessed June 26, 2008) 47. The New York Times, “A Prosperous Year for Cuba,” December 3, 1892. http://query.nytimes.com/mem/archive-free/pdf?_r=1&res=9D07E3DF1731E033A25757C0A9649D94639ED7CF&oref=slogin (Accessed 19, 2008). 48. Associated Press, “Cuban Oil Renews Embargo Debate,” MSNBS. Com, July 2006. http://www.msnbc.msn.com/id/14095881/ 49. LatAm Energy, “Repsol-YPF delays Cuba Exploration,” May 14, 2008. http://www.accessmylibrary.com/coms2/summary_0286-34546028_ITM (Accessed June 25, 2008) 50. Laura Smith-Spark, “Cuba Oil Prospects Cloud US Horizon,” BBC news, September 2006, http://news.bbc.co.uk/2/hi/americas/5321594.stm (Accessed June 23, 2008) 51. Mary Ellen Klans, “Crist: I now Support Oil Drilling off Coast,” The Miami Herald, June 18, 2008. http://www.miamiherald.com/top_stories/story/573350.html (Accessed on June 26, 2008) 52. Fidel Castro, ““Reflexiones del compañero Fidel: ESTADOS UNIDOS, EUROPA Y LOS DERECHOS HUMANOS,” Cubadebate.com, June 20, 2008. http://www.cubadebate.cu/index.php?tpl=design/especiales.tpl.html&newsid_obj_id=11853