KeywordsA1 - General Economics
E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
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AbstractThe 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.
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.