China Leads the Global Energy Revolution.

Author:Arias, Galdino
 
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INTRODUCTION

The use of petroleum dates back to ancient China more than 2000 years ago. The Chinese were the first to use petroleum as fuel as early as the fourth century BC (Deng, 2005). The demand for oil ramped up with the invention of the first commercially manufactured motor car in 1885 by the German engineer Karl Benz (Kaiserlicht Patentatm, 1886). This new vehicle ran on a cheap by-product called gasoline, and the need for this new fuel rose greatly with Henry Ford's Model T in 1908. Throughout the 20th century, oil usage expanded to almost all goods and services world-wide and, since then, countries have become essentially addicted to it. However, this heavy reliance on oil is unsustainable, not only because world consumption and population have been steadily increasing, but also because the discovery of new oil reserves has been diminishing. Currently, the world is widely debating environmental issues and a consensus has emerged about the negative impacts that fossil fuels have on the world climate and the long-term unsustainability of oil being the main energy source.

The pursuit of renewable energy also has long historical roots. For example, in the 1890s, the German inventor Rudolph Diesel developed a powerful and efficient diesel engine using vegetable oil fuels. He envisioned that pure vegetable oils could power early diesel engines for agriculture in remote areas of the world where petroleum was not available at the time (Chalkley, 1912). Many other inventions in different parts of the world were created during the last century, but most of them on a small scale. These efforts may have been limited because of the pragmatic view that oil was plentiful and, therefore, there were few incentives to foster new technologies on a larger scale. In the 21st century, world leaders have awakened and major initiatives have been taking place. As reflected in the countries that signed the Paris Climate Agreement, there is a consensus on the importance of expanding renewable energy sources. One fact is evident: China is leading by far this race and threatening the historic American hegemony on energy.

RELIANCE ON OIL IS UNSUSTAINABLE--DATA AND FORECASTS

It is clear that the equation of oil supply versus oil demand will not balance in the near future. The question focuses on how many years we still have ahead before total oil reserves are mostly depleted. Below is a 2016 chart provided by an OPEC data base. It shows the number of barrels from proven crude oil reserves for OPEC and non-OPEC members. Adding both figures, the world still has approximately 1,500 billion barrels of crude oil (OPEC, 2016).

In addition, from the OPEC data base, the chart below shows world oil consumption per day and per year. If we assume that in the future world consumption will be equal to that of 2016 (95 million barrels per day or 34.6 billion per year), we can estimate that total depletion will happen in the next 43 years. It is important to note that this yearly estimate may be overstated, since world population and consumption may increase and there is an oil availability level at which extraction is not financially viable. The number of cars in China increased at an impressive rate of 912% over 15 years, from 16 million cars in 2000 to 163 million cars in 2015 (Statista, 2016). This fact alone shows the gravity of the problem and the impact that high economic growth countries will have on the world-wide demand for oil in the coming years.

This view is in line with that of Dr. William Shepard's, professor of renewable energy, who has forecast that in the next 25 years oil reserves are going to be seriously depleted. Matthew Simmons, former energy adviser to U.S. President George W. Bush, pointed out that the heads of the world's largest oil reserves testified and agreed upon the oil depletion issue in front of Congress. An example of this consensus is that ExxonMobil printed the graph below in the Oil and Gas journal. The chart shows future oil demand increasing along with decreasing oil discovery and production (Tickell, 2008).

In sum, it is evident from the data that there is agreement on oil supply running out and on challenging times ahead.

UNITED STATES AND ENERGY

Since the beginning of the 1900s, America has been able to demonstrate an entrepreneurial and leadership position in research and development of new technologies. This is part of its DNA. This was dramatically shown when President John F. Kennedy gave a speech on September 12, 1962 about sending the first man to the Moon. More recently, in the last 25 years, the United States has led the advance and development of information and communications technology (ICT) and transforming the world economy. In terms of energy, the 1970's oil crisis also generated entrepreneurial initiatives after America saw its national security and sovereignty threatened by the OPEC members, which then controlled 80% of oil reserves. In 1979, President Jimmy Carter became an advocate of clean energy initiatives as a way to reduce U.S. dependence on foreign exporters. He not only stipulated a target of 20% of the U.S. energy generation coming from renewable sources by 2000, but also installed solar panels on the roof of the White House as a sign of support for the clean alternatives. Furthermore, during this same period, a Wisconsin farming community called Soldiers Grove implemented a plan to become America's first all solar energy town. A few years later, despite the limited solar technology at the time, the community achieved its plan (New York Times, 1987). These basic examples demonstrate pro-active characteristics commonly found in creative and entrepreneurial people. But what happened afterwards? Which path did the U.S. choose to follow?

Right after the election defeat of President Carter, President Ronald Reagan ordered the removal of the solar panels installed in the White House. In addition, one of his cabinet secretaries said that solar was not a technology befitting a superpower. Moreover, in 1986, the Reagan administration cut the research and development budget for renewable energy and eliminated tax breaks for the deployment of wind turbines and solar technologies. With this, US decided not to diversify its energy matrix, but to rely on inexpensive but polluting fossil fuels. But the question remained: how would America achieve its energy freedom?

The United States consumes 22% of the world's oil, but has only 2% of its reserves. It would be reasonable to think that an entrepreneurial country would work out ways to increase its efficiency in renewable energy generation; however, this has not happened. Whereas solar, wind and energy storage technologies have been researched and developed throughout the country, these initiatives have not received government support to allow larger scale deployment. At the same time, there is a pollution effect. The U.S. represents only 5% of the world's population, but the American car fleet creates almost 50% of the world's automotive CO2 emission (Borger, 2006). The end result has been a country addicted to oil, which creates harmful pollution and which lacks a long-term alternative plan for its energy matrix.

This fossil fuel imprisonment is most likely explained by an energy industry which is over 100 years old and which uses its economic...

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