Energy, Water and Food: Three legs of Civilizations' Stool

I just finished reading an interview which first appeared in the 4/23/12 issue of Forbes magazine that Rich Karlgaard, a Forbes staff member had with Shell Oil's Peter Voser. Mr. Voser is the new CEO of the UK owned oil giant headquartered in the Netherlands. He is the first CEO not of UK or Dutch citizenship and the first non-technical CEO for the company, he's an economist of all things. While you might not think of Shell as an environmental friendly company, one thing remains true, our world runs on petrochemicals and will for quite a long time. Mr. Vosser points out that until only very recently biofuels reached the 1% of consumption/production point and solar is very close behind biofuels. And that's after decades of pushing both of these alternative energy sources. So the chances of displacing oil in 10 years as a dominate player is pretty slim and likely none. Why is this important? Why do we preach diversity in energy production and high efficiency for buildings? 

Mr. Vosser points out that by 2050, just a mere 38 years from now, 75% of the world will live in cities and the demand for energy will double. But that demand won't come from what we currently call the developed world, but from emerging economies, including China. Oh yes, that doubling takes into account aggressive conservation efforts in the developed economies. That's our economy, western Europe, and the rest of the G20. If that conservation is taken out, then the demand triples by 2050! Triples!!! 

That puts a tremendous strain on the petrochemical reserves available today. The US is thought to hold some of the largest, if not the largest natural gas reserves in the world, Far larger than the OPEC reserves combined. This single fact presents a possibility that the US could become an energy exporter. If you think that this fact can be ignored, then think again. This year will likely be the first time in history that a company tops $500 billion in sales. Two oil companies are good bets to pass that mark: ExxonMobil and Royal Dutch Shell. I'm not giving out stock tips here, but I am saying the rhetoric and noise we hear in the general press about alternative energy sources replacing oil in the near future are at best wishful thinking and at worst outright lies, bald faced lies. I wish it weren't true, but the facts speak for themselves. There is a possibility of transition from petrochemicals to renewable resources over time and we should continue to pursue those alternatives, but to think they will supersede oil in the near term is an outright fantasy. This is a two-edged sword. On one side the tremendous demands being made on the non-renewable sources on the other is the demand for new sources of renewable energy to increase the available energy available.

One of the greatest issues facing the global economy is the pressure from the developing countries. If we use the same adoption cycles of the western world they won't be able to work toward using energy efficiently for a number of years. During this time the market pressures will be pushing up the price of petro-chemically based energy. Mr. Vosser thinks we have seen the low threshold of energy in the mid to high $3 / gal for gasoline and it will only steadily rise from here on out. Goodby less than $3 gasoline in the USA. natural gas is experiencing a temporary sag in prices, but as a way to export that fuel is developed, you will see an immediate global demand drive those prices up as well. High demand in Western Europe, Russia, Africa and the far east will put pressures on the oil and gas producers they have never experienced before. Until the emerging economies understand that conservation is key to economic growth, demand over the next 20 years will be astounding and prices will reflect this fact.

While this has a direct effect on transportation and heating, the manufacturing and processing industries will be hit hard as well driving up the cost of basic services to everyone. Food and water will be impacted very quickly. The Water-Energy interdependency cycle is well known, You can't produce potable water without using a lot of energy. A little known fact is that in many communities the water treatment plant is the largest user of electricity in a community and this is especially true in communities which have large service sectors and little heavy industry. Food is dependent on water production, processing, transportation, and refrigeration which are all very dependent on energy. Mr. Vosser sees the challenge to bring adequate water, food and energy to the quickly urbanized areas a key problem. How will we manage to do this in the newly emerging cities of developing countries? It is a problem we have been trying to solve for a long time and haven't been able to find good answers yet.

These problems are the kind that don't have a single good answer. One solution for one area won't necessarily work in another are.

One telling point Mr. Vosser makes as he closes with is his answer to the question posed by reporter Karlgaard of "Would the CEO of Shell be driving an electric car?" Mr. Vosser replied, "Not as long as coal is the source of most electricity." Is Mr. Vosser being parochial about the energy source that developed the electricity, or is he making an environmental statement about encouraging power production from a much more dirty fossil fuel that oil or gas? You be the judge. By looking at his record so far at Shell, I hope it is the latter.


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