The odd thing about energy policy is that most of the arguments ignore most of the energy that we actually use. That’s because the focus is almost exclusively on power generation even though electricity accounts for only a fifth of total energy demand.
Thus while a war of words rages over the relative merits of wind power, nuclear, gas-fired and coal-fired technologies, we should remember that they are all irrelevant to the other four-fifths of our energy demand – which is for heating and transport fuel. One day, our cars and heating systems will turn electric, but until then we need a much broader energy debate.
In particular, we need to think about oil and gas and where we get them from. In this respect, America is showing the way – boosting domestic production through the fracking of shale formations. But while these unconventional sources hold great promise, for now it is conventional oil and gas that is the mainstay, with the Middle East as the most important geographical source (especially of oil).
Mark Perry sets out the facts in an article for the Investor’s Business Daily:
“In spite of the boom in U.S. oil-shale production, the world has become more reliant on a handful of Gulf oil producers whose resources are more stretched than at any time since the 1970s. So it’s no surprise that the price of crude oil is above $100 a barrel, and that the average price of gasoline in the United States has exceeded $3 a gallon for the past 1,000 consecutive days.
“In August, according to the International Energy Agency, Saudi Arabia and two other Gulf producers met a near-record 17.1% of world oil demand.”
America may be producing more of its energy needs domestically, but this is not the same thing as energy independence. If the rest of the world is dependent on the Middle East for its energy, then so is America. Given the reality of globalisation, it can be no other way:
“Saudi Arabia is already the single largest supplier to many of the largest importing countries like China and Japan, bringing on new production to replace declining supplies from Libya, Iran and Venezuela.
“In fact, Saudi Arabia is now taking in more than $1 billion a day in oil export revenues.”
While our politicians bicker about ‘keeping the lights on’, what we should really worry about is keeping the oil flowing out of the world’s most dangerous neighbourhood. Compared to the multiple threats to the very lifeblood of the global economy, all the fuss about building enough power stations back home begins to look like a displacement activity.
The possibility of a truly catastrophic interruption to the supply of energy from the Gulf states is nightmare that we’ve lived with for too long. Breaking free though will not be easy.
Mark Perry’s answer is ‘drill, baby, drill’:
“For the United States, the very important task of crafting a sensible and viable energy policy — one that ramps up oil and gas production — cannot be ignored. Without decisive action to open up new areas to drilling for oil and gas, both on land and offshore, there is a real danger that the drive to achieve energy security will be stopped in its tracks and serious harm could be done to our economy.”
Yet there can be no American (or British) energy security without global energy security. We won’t be safe unless our major trading partners each have a domestic energy revolution of their own.