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Raffique Shah


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A 'seismic shift' in the energy world

October 02, 2005
By Raffique Shah

IN discussion with one of our energy experts recently, when I asked him about current thinking that this country's oil and gas reserves may run out within 50 years, his response was, "I don't agree with that. As it stands, we have reserves that could last us that long. And we are still exploring there are good prospects that we'll find more fossil fuels." Saudi Arabia, he postulated, can produce crude oil almost indefinitely. "It now costs them around US$1 to produce a barrel of crude. But they have immense reserves of heavier crude which they can tap into for an almost indefinite time. It will cost more, but it will be there."

Last week, Venezuela's President Hugo Chavez, almost echoing the sentiments of my friend, said in Brasilia: "With this mission of energy integration, Venezuela guarantees petroleum and gas for the South American continent for at least 200 years." Venezuela and Brazil will jointly exploit oil in the Orinico tar belt (very heavy, costly crude). His new "Petroamerica" initiative integrates three current projects-Petrocaribe, Petrosur and Petroandina-under which fuel is sold to member countries on preferential terms.

Last week, too, at another important energy meeting, this time the 18th World Petroleum Congress in Johannesburg, South Africa, Christopher Flavin, president of the Washington-based Worldwatch Institute, told oil executives and energy ministers: "Energy markets are about to experience a seismic shift." He stated that energy drawn from the wind, tide, sun, Earth's heat and farm waste is poised to begin replacing oil and other fossil fuels. "The question," Flavin told his distinguished audience, "is whether you are in the oil business or the energy business."

Who are we to believe on this question of the future of fossil fuels? The school of thought that energy reserves that lie beneath the Earth are inexhaustible, or those who believe that not only are fossil fuels are not only dangerous to the Earth's future, but that they will become increasingly expensive, and will ultimately be replaced by alternative, renewable energy sources?

These are questions we need to address since our future as a nation hinges heavily on our oil and gas reserves. In fact, it was an optimistic Finance Minister, PM Patrick Manning who delivered the 2005-2006 Budget that was loaded with largesse and based almost solely on expected revenues from oil and gas.

This debate is not one we should shun, or approach ostrich-like. We in T&T, and Chavez in Venezuela, must be both realistic and futuristic in our thinking lest we find ourselves left in the lurch 10 or 20 years down the road. It's true that at this point oil accounts for about 30 per cent of the world's energy use; renewable energy sources currently make up a meagre two per cent of world consumption. Other fuel sources are coal (still big in America, Europe and Asia), hydro-electric and nuclear, in that order.

Renewable energy, however, needs to be taken seriously, more so as oil prices soar to levels never before seen. Oil, most experts agree, will not dip below US$50 a barrel. In fact, if anything, it's likely to approach the US$100 mark. This is welcome news to net oil exporters (like Venezuela and T&T), but very bad news to non-oil producing countries, more so the poorest nations in the world. Outside of nuclear and coal, many European countries are turning increasingly to wind and solar energy to mitigate their energy bills. Recently, when President George Bush signed the new Energy Bill, besides allowing for generous tax breaks (US$14.5 billion in four years), he also allocated a tidy sum for pursuing renewable energy.

The US currently imports 58 per cent of its oil, and this dependency is expected to increase to 68 per cent by 2025. With prices at the pumps crossing the $3 mark, many Americans have voluntarily "parked up" their gas guzzling SUVs and luxury cars, and are choosing instead to use public transport or smaller, in some cases hybrid, cars. In the past, the price of oil has been largely dictated by Americans' insatiable appetite for oil. Hell, they have gone to war over oil: witness Iraq and Afghanistan.

Now, the parameters are changing. If Chavez had not had a vision of "The Americas" becoming less dependent on the US, both as its major market and the biggest-muscle-on-the-block, small Caricom countries will have been weeping long tears. But the truth be told, The Americas (and here I include the Caribbean) cannot continue to have a virtually free ride on the backs of Venezuela, T&T, Equador and Mexico. Is it not better that we plan now for a future based on renewable energy, rather than risk a continuing dependency on oil and gas? If we do, we must start now. Capital expenditure on wind and solar energy is high, and we can use the oil windfall to make this "seismic shift".