G-8 Summit: Its Just an Issue of Supply and Demand

As oil sits at a record high of $138, and US gas prices tip over $4, the top industrialized nations of the world are asking for increased production, investment in new technologies and increased efficiency at the G-8 summit in Toyako, Japan. All 8 nations – the United States, Russia, Japan, Germany, France, Italy, Canada and Britain – voiced a plan on how to cut their own dependence on fossil fuels.

AP

The US plan involves “aggressive investment in renewable energy and other alternative energies, as well as the development of traditional hydrocarbon resources.” While this statement is a bit general, I have to agree on its basic premise. An attempt to increase hydrocarbon production is necessary to prevent one of those theoretical superspikes in oil futures and eventually shortages, which could bring about economic collapse. However, depletion will begin to occur at some point, and there needs to be a much better array of substitutes for hydrocarbons when that happens than there is now. However, we will have to wait in see if production can in fact be increased significantly.

If nothing was said about conservation at these meetings, it would be unforgivable. After all, a recent IEA report said an eight-fold reduction in carbon intensity was needed by 2050. Luckily, the world leaders are starting to talk about conservation. The G-8, China, India and South Korea established the International Partnership for Energy Efficiency in order to promote to best practices for conserving energy. A positive step, but if technology is the only solution, we could run into Jevons Paradoxand the thirst for energy could increase even more.

There was also disagreement on nuclear power. The UK foresees a new “nuclear age,” while Germany is still phasing out nuclear power. Looking at how Germany’s electricity is produced (below) it is doubtful it will be able to maintain that stance in the face of hydrocarbon depletion.

Other issues such as fuel subsidies and carbon capture and storage were also discussed.

Altogether, progress is being made, but is there enough time? Probably not to prevent all hardship, but a transition away from fossil fuels can be achieved. To be successful, an immediate full effort towards eliminating fuel subsidies, reducing energy intensity, increasing investment in hydrocarbon production and a very large investment in alternative energy production is necessary.

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