I’ve got an interesting update rather than full post on a particular issue. I attended a discussion panel on the Future of Energy at Georgetown University which included several figures from both academia and local think tanks. It was an interesting discussion followed by a Q&A session. I have summarized the main points of the discussion below:
Oil is still the primary commodity in energy and remains the world’s most traded commodity, in both value and volume. However, the US is probably past peak demand for crude oil, while energy demand is shifting to other sources, such as cheap natural gas. The energy infrastructure, to include electricity, transportation, industry, and supply lines, is slowly changing to accommodate these changes. The large capital costs prevent a rapid shift.
The United States will likely become energy independent, possibly by 2020, as technology improves. Hydrocarbons will still dominate the energy solution, in the US as well as around the world. Renewables and alternatives to hydrocarbons are not viable at the moment and will remain more expensive than hydrocarbons for the foreseeable future. The technology that has made the exploitation of shale gas and oil and other unconventional resources has driven down their costs and has made alternatives uncompetitive economically. Currently, renewable cannot compete with such cheap sources of oil and gas.
The technological advances in the US and the vastly expanded supply of hydrocarbons in the country will alter the dynamic behind the worldwide energy trade on both the supply and demand side. This will change the system upon which the Middle East and Russia rely for export earnings and maintaining their systems of governance.
Middle East wealth distributions are too skewed towards the top causing resentment and instability with the majority of citizens in these countries. The rulers, to whom the oil and gas wealth flows, have no incentive to change as they enrich themselves and would be unable to do so if the government were to adopt stronger and fairer rule of law or any further changes. As a result, there will be more turmoil in the region, especially as the US increases its own oil and gas production and disrupts supply and demand in the markets. It is possible that Iran and Iraq descend into chaos or suffer upheavals that present opportunities for the countries to attack smaller, but rich countries, such as Kuwait and Qatar, to bolster incomes and provide a common enemy for the people.
Nuclear power will likely continue to grow as countries, especially those in the Middle East seeking to sell rather than burn oil and operate water desalination plants, try to meet their electricity demands. However, the infrastructure and regulatory bodies for these industries are difficult and time-consuming to implement at the level of desired competence and authority. The capital costs behind these projects, barring small modular nuclear plants, are prohibitive for most countries. Moreover, stakeholders in nuclear, such as students studying the science behind it and regulators, would need assurances and guarantees of completion of these projects to commit themselves to the nuclear path. Such guarantees are, however, only viable in specific cases in countries with adequate capital at hand. Many of the countries considering this route, such as those in the Middle East, are notorious for wasteful public budgets and many are indebted and retain budget deficits despite their enormous hydrocarbon wealth. This effectively prevents a simple transition to nuclear power.
These are the basic ideas I gathered from the panel. Overall, it was bullish on hydrocarbons and pessimistic about the viability of alternatives in the face of cheaper oil and gas. Turmoil in the Middle East also appeared to be a given in the near to medium term. I will likely expand upon these issues in future posts, but I wanted this to serve as a quick update rather than a protracted explanation.