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THE OIL CRISIS: A RETROSPECT
- Energy strategy should now be directed towards global warning

The Seventies saw two oil crises. In the first one of 1973, crude oil prices suddenly quadrupled. It threw most countries into a payments crisis. The oil exporters got too rich too quickly; they could not spend all the money. They gave much of it to banks in New York and London to manage; that mitigated the payments problems of the United States of America and the United Kingdom. It also bailed out those developing countries that borrowed that money only to sink them into prolonged debt crises later on when the flow of petro-dollars stopped and the time to repay arrived. Then there was a second oil crisis in the late Seventies. Although the price rise was less drastic, countries that had not fully overcome the first one found it difficult to cope.

It was in the wake of those crises that International Development Research Centre in Canada set up the Energy Research Group, consisting of energy experts from developing countries, to work out energy-related solutions for those countries. As its coordinator, I commissioned over 100 papers, published them in 15 volumes, and drafted the final report of the group. It is 20 years since the group was constituted; so I decided to look at how well our conclusions had stood the test of time.

At that time, the problem appeared to be one of an imminent absolute shortage of oil. The ratio of oil reserves to annual production then was 27 years; so it was assumed that in the absence of further discoveries, oil would run out in a generation. That assumption was dubious. But countries that could not even then afford oil were immediately facing problems that the world was expected to face eventually. Immediate oil replacement seemed a good strategy for them.

Energy specialists were even then divided between those who wanted to replace oil with renewable energy sources and those who favoured existing conventional fuels principally coal and nuclear energy whose reserves were many times larger than those of oil. The views were represented in the group; I had to find a formulation acceptable to all. Biomass energy growing trees to burn them looked feasible in some places. Brazil was already using charcoal to make pig iron in the place of coking coal, and compelling car owners to use ethanol in cars, both on its own and in a blend with petrol. But on the evidence available, no renewable energy source could compete with conventional energy and replace it to a significant degree. So the group did not tilt in favour of renewable energy. It was divided over nuclear energy. It saw the most viable substitute for oil in natural gas, which was then both little exploited and insufficiently explored. Although coal was more expensive than natural gas, its reserves were enormous, and it could be the backbone of world energy consumption for centuries. Both coal and gas could be used to produce methanol, a liquid that could serve as a vehicular fuel.

Carbon dioxide concentrations in the air were being measured at a monitoring station atop the Mauna Loa volcano in Hawaii from 1958; they showed an increase of about 5-6 per cent by the early Eighties. Burning of fuels principally coal and oil was recognized to be the major source of carbon dioxide. But the link between its atmospheric concentration and global temperature the greenhouse effect - was still not accepted by all. Taken over centuries, temperatures showed cycles. But assuming there was a greenhouse effect, chlorofluorocarbons contributed much more to it per ton than carbon dioxide; they were used in compressors employed in cooling devices. We proposed their replacement by more benign substitutes; they have been largely replaced in the past 20 years.

Solar, water and wind energy generate no carbon dioxide at all. Burning biomass does; but growing biomass sequesters carbon dioxide, and a cycle involving its growing and burning leaves atmospheric carbon dioxide unchanged. So renewable energy does not contribute to global warming. But the Energy Research Group was agnostic about global warming; this was another reason why it was neutral with respect to renewable energy.

In 1998, the United Nations development programme, the United Nations department of economic and social affairs and the World Energy Council funded another assessment of energy; it was chaired by Jose Goldemberg, who earlier was a member of the Energy Research Group. It came out last year; it updates what we did in the Eighties.

Since then, oil scarcity has become an even less worrisome prospect. World reserves had risen from 27 times annual production in 1980 to 41 times in 2000. Natural gas reserves are at least as high. Reserves of oil shale are twice as large and cost of production of oil from it has come down. Then there are heavy oil and tar sands. So oil scarcity is no longer worth worrying about, at least in this century.

But 1998 was the hottest year in a millennium. The 11 hottest years since 1860 have all occurred since 1983. Glaciers are clearly in retreat, so is the Antarctic ice cap. So global warming is much more credible today, and energy strategy must be directed towards it.

Meanwhile, however, fuel-burning equipment has become both more energy-efficient and versatile. Coal is nowadays used mainly for power generation. In the new power plants, coal is first burnt with inadequate air to make carbon monoxide, which then is burnt to generate heat. Plants that do this integrated gas combined cycle plants generate only 2 per cent as much carbon dioxide per unit of heat as old-generation coal-fired plants. If natural gas is used instead of coal, the figure comes down to 1 per cent.

Hence coal burning can now be increased manifold without increasing carbon dioxide emissions if we replace the equipment. And fluidized-bed combustion plants can use any fuel coal, wood, dung with high efficiency. Density of vehicle use is high in cities; there the problem is not just of carbon dioxide emissions but also of carbon monoxide, which is a poison, and nitrous oxides. Substitutes for petrol and diesel must give out lower emissions of all three. A number have already been tried out. Ethanol in Brazil has been on the border of competitiveness it has done well when oil prices were high, and made losses otherwise. It is no longer worth using on its own; it may survive as an additive. But it does not reduce total emissions much. Methanol is better, but not much.

A derivative of methanol, methyl tertiary butyl ether was tried out in the US and was much lower on emissions. It is being used as an additive in large parts of the US. But it seeps into water and gives it a smell, so it is on its way out. Electric vehicles were tried out in California, but were given up they needed to be recharged too often. Meanwhile, California has mandated that 10 per cent of vehicles sold this year must be zero-emission. Most manufacturers will use fuel cells, which convert fuel into electricity without burning it. The fuel cells will first use ethanol or petrol, but will eventually use hydrogen. Hydrogen will probably be made by separation of natural gas into nitrogen and hydrogen by Fischer-Tropsch process. Meanwhile, the simplest, if not the cleanest, course is the one adopted in Delhi use compressed natural gas.

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