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Part 1:
The Cost of Natural Resources
As Hite and Seitz (2016) show in Chapter 4: Energy, the world is in the midst of an energy crisis as it concerns the rapid use and depletion of nonrenewable natural resources.According to the textbook, “Many experts predict that the largest increase in demand for oil in the coming years will come from increasingly industrialized economies with large populations…” (p. 140)Can this be offset by measures taken in developed nations to address the energy–climate crisis? Why or why not? What potential strategies could be used to reduce the demand for energy in industrialized economies with large populations?Review the posts of your classmates and respond to at least one other post, offering a substantive comment on that classmate’s position on the issue(s).Part 2: Respond to peer’s post (5 – 10 sentences)Peer’s Post: “Hello everyone,For such a long time now, our planet has been experiencing a rapid growth of the human population. With that being said, it should come as no surprise that we have more people on the earth using more fossil fuel to generate more energy consumption. Our natural resources are being depleted. What can we do to either stop or reverse this process from taking place? Addressing such measures in developing nations is, in my opinion, the very first place to start. Education is the fundamental key to begin helping people and governments to make great strides in the reduction of natural resources. Regardless of how one country feels towards another, we all share this planet. It is our home. In order to preserve our planet for our posterity, we must begin now to take steps to reduce the demand for natural resources.If all of the nations of the earth begin now to reduce or eliminate the human footprint on the earth, we can all enjoy a cleaner atmosphere. Earth is the only planet we know that can sustain life. If we destroy this planet, what hope is there for future generations? It has been said before, “We don’t inherit the earth from our ancestors. We borrow it from our grandchildren.” I don’t know where the quote came from. However, there is certainly a great deal of truth in it. It just makes sense to come together and agree to cooperate in the effort to halt climate change.” Energy
130
A human being, a skyscraper, an automobile, and a blade of
energy that has been transformed from one state to another,
Energy
131
grass
all
Jeremy Rifkin, Entropy (1956)
represen
Table 4.1 US gasoline prices, 1950–2009
Year
1950
Retail price per gallon of regular gas (5)
0.27
0.31
0.36
1.21
1.16
1.69
2.35
1960
1970
1980
1990
2000
2009
The Energy-Climate Crisis
Are we running out of energy? Of course not. Everything is made out of entert
and, as college students learn when they study the laws of thermodynamics in the
introductory physics courses, energy cannot be destroyed. These laws also state
energy cannot be created: all we can do is to transform it from one state to an
And when energy is transformed, or in other words, when it is used for some
the energy is changed from a more useful to a less useful form. All types of ener
eventually end up as low-grade heat. A “law in the physical sciences means the
there are no exceptions to it, and there are none to the laws of thermodynamics!
So if everything is energy and energy cannot be destroyed, why is there an en
crisis? The crisis has come because of the other laws, the laws that tell us thate
cannot be created, and that, once used, it is transformed into a less usable form
present, the industrialized world relies on a very versatile, although polluting, final
carbon, especially in the form of oil for transport and coal for electricity.
dant supplies of cheap energy from traditional sources which generate medier
growth and material prosperity took place in the United States during the 155
emissions of carbon dioxide (CO2) and other pollutants. Unprecedentede
Sources: Data from “Dollars and : Sense, July-August 1980,” in Kenneth Dolbeare, American Public
Policy (New York: McGraw-Hill, 1982), p. 113; The World Almanac and Book of Facts 2006 (New
York: World Almanac Books, 2006), p. 138; US Energy Administration, Monthly Energy Review
(October 2010), p. 122.
economic
events in that part of the world.
and 1960s, and this was made possible, in part
, by cheap energy
. Largely by delen
this became the model for development, where individual lifestyles and modes e
industrial production were based on plentiful, inexpensive, polluting energy.
Oil is being consumed at prodigious rates – about 90 million barrels a day tez
produced in 2013. Yet its supply is controlled by a limited set of producers, and its
price has fluctuated greatly. Table 4.1 shows this fact as well as any set of figures can,
as it focuses on the changes in the price of gasoline in the United States from 1950
to 2009. The table also helps us understand another important feature of the energy
crisis, especially as it has affected the United States. The period of cheap gasoline was
a relatively long one, and people in the United States got used to having an economy
based upon inexpensive petroleum products. When oil prices skyrocketed in the
1970s, the shock to the US economy and to the economies of many other countries
was profound.
The first oil shock took place in 1973 and 1974. The 1973 Arab-Israeli war led a
number of Arab oil-producing countries to stop shipping oil to the United States and
other countries allied with Israel. American motorists lined up at gas stations, vying
for limited supplies. The Organization of Petroleum Exporting Countries (OPEC)
,
of which most oil-exporting nations are members, seized the opportunity to raise oil
prices significantly, and prices quadrupled.
The second oil shock came in 1979 and 1980. The event that prompted this shock
was the Iranian Revolution and the ousting of the Shah as the head of the Iranian
government. Iranian oil shipments to the United States stopped, but the real shock
came when OPEC doubled its prices. Many North Americans had refused to believe
there was a real energy crisis after the first oil shock and had returned to their nor-
mal high consumption of petroleum products after the Arab embargo was lifted; but
the second oil shock convinced most people that there was indeed an energy crisis.
While many had blamed either US oil companies or the US government for creating
the first oil crisis, the second shock clearly demonstrated that something had fun-
damentally changed in the world. What became apparent to many now was that the
United States and most other developed nations were dependent on one section of
the world for a significant part of their energy, and that they could no longer control
The large increases in the price of oil made by OPEC in the 1970s led to a
massive transfer of wealth from the developed nations to part of the developing
world. In the words of one commentator, “It may represent the quickest massive
transfer of wealth among societies since the Spanish Conquistadores seized the
Incan gold stores some four centuries ago.” Higher oil prices led to low economic
growth, higher inflation, big trade deficits, and increased unemployment in the
United States and other developed nations. Although developing nations use much
less oil than do the developed nations, the cost of their imported oil also went up
and caused some of them to acquire huge debts to pay for the oil they needed.
Daniel Yergin, the coeditor of an important report on energy from Harvard Busi-
ness School, assessed the potential consequences of the oil shocks in the following
terms:
The unhappy set of economic circumstances set in motion by the oil shocks contains the
potential for far-reaching crises. In the industrial nations, high inflation, low growth,
and high unemployment can erode the national consensus and undermine the sta-
bility and legitimacy of the political system. In the developing world, zero growth
leads to misery and upheavals. Protectionism and accumulation of debt threaten the
international trade and payments system. And, of course, there is the tinder of inter-
national politics, particularly involving the Middle East, where political and social
Energy
132
upheavals can cause major oil disruptions and where fears about and threats to energy
supplies can lead to war.
a pricing of ol
depose the Iraqi president Saddam Hussein.
plants for poisonou
Energy and security
The third oil shock came in 1990 and 1991. Iraq invaded Kuwait and threatened
Saudi Arabia. In order to prevent Iraq from becoming the dominant power in the
Middle East and having significant influence on the production and
from that region, the United States led a coalition of forces in driving Iraq out of
Kuwait. The war, which lasted just six weeks, involved half a million US soldiers
and token troops from other nations. A huge, sustained air attack on Iraqi forces in
Kuwait and Iraq and on military facilities in Iraq (including on
gas and nuclear weapons) preceded the ground attack. The allied forces had few casu
alties, but the retreating Iraqi forces, which suffered large casualties, sabotaged more
than 700 oil wells in Kuwait, setting about 600 on fire.
The United States persuaded other developed nations, including Japan, to con
tribute about $50 billion to help pay for the war. The United States spent about
$10 billion for short-term costs. The war and its subsequent damage to their lands
and economies cost all the Arab states an estimated $600 billion. The price of a
increased dramatically right after the Iraqi invasion of Kuwait, but by the
end of the
war the price had dropped back to the prewar level. That price did not reflect the
cost of oil, which should have included the cost of the war. (It has been estimated the
by the mid-1980s the United States was spending seven times as much keeping the
shipping lanes open to the Middle East oil fields as it was for the oil itself.)?
Hormuz.
Energy
133
In 2003 the United States invaded Iraq and conquered the country after a rela-
tively short war. Its main public reason for doing so was to destroy weapons of mass
destruction were ever found and the United States later stated that faulty intelligence
destruction, which the United States claimed Iraq possessed. No weapons of mass
led it to believe Iraq had such weapons. A few allies of the United States supported
the invasion – mainly the United Kingdom – with relatively small military forces,
but the invasion was opposed by most nations of the world. It created intense hos-
tility toward the United States in the Arab world. Many nations believed the main
reason for the war was to help the United States secure its sources of oil, although
some believed that President George W. Bush had personal reasons for wanting to
The Middle East, which supplies much of the oil imported into the United States
and Western Europe, is a politically unstable area. It is torn by regional conflicts,
religious conflicts, social and ideological conflicts, and, in the past, by East-West
competition. A large amount of the oil involved in international trade is carried
on ships that must pass through a single strait in the Persian Gulf – the Strait of
The United States has historically been the largest buyer of oil in the world. In
the past, much of it came from a single country, Saudi Arabia. Over the past two
decades, China became the fastest growing oil market in the world, buying more oil
from Saudi Arabia than the United States. But that growth seems to have slowed in
tandem with overall economic growth. Many Western European countries are even
more dependent on imported oil than the United States, as is Japan, the industrialized
country most dependent on imported oil, producing virtually no oil itself and having
few other domestic sources of energy.
This section has focused on the oil crisis, which has affected mainly the indus-
trialized nations. But that is not the full story of the energy crisis that the world
faces
. Billions of people use very few fossil fuels at all, relying mainly on wood, char-
coal, cow dung, and crop residues for cooking fuel and for heat. In Africa alone,
730 million people use traditional sources of energy. The shortage of firewood in
the south of the African continent is increasing as population growth has caused
consumption of wood to exceed the growth of new supplies in many areas.
Now, due to climate change, experts are predicting that unless a breakthrough
technology enables fossil fuels to be burned with dramatically lower carbon emis-
sions, much of the existing oil reserves will need to remain untapped if the world is
going to avoid catastrophic climate changes. So not only does the price of oil impact
energy-intensive economies, but the availability and price of substitutes of cleaner
energy sources present new challenges to conventional development pathways.
365
TURKEY
400E
48°
Iraq
Mediterranean
Sea
Euphrate
ECYPRUS
SYRIA
LEBANON
-34°N
IRAN
Baghdad
Sy
і ап
Tigris
ISRAELL
D
e
s e
t
Babylon
WEST
BANK
JORDAN
0
90 Miles
Basra
Government Responses to the Energy-Climate Crisis
0
90 Kilometers
30°N
Persian
SAUDI ARABIA
KUWAIT Gulf
Let us look at a few key countries and regions to see how their governments have
responded to the energy crisis.
MAPOUEST
Map 4.1 Iraq
Energy
147
The Energy Transition
The world is entering a period of transition from one main energy source –
principal
to a new
source or a variety of sources. This is the third energy transi-
oil –
tion the world has passed through: the first was from wood to coal, and the second
industrialized world must shift from its reliance on nonrenewable and dangerously
polluting fossil fuels to energy sources that are renewable and less polluting. Many
in the industrialized countries, but fewer in the United States, understand that their
dependence on imported oil must end since it is not a clean fuel, and neither is it
cheap, abundant, or secure. But what will be the new principal energy source for the
industries of the developed world and the new industries of the developing nations?
As in many transitions, the end to be reached is not clear. The only clear thing now
is that the present state of affairs is no longer viable. We are in the beginning years
For the rest of this section, we will examine some of the potentialities of the most
often discussed energy sources. Energy sources can be divided into those that are
nonrenewable (i.e., it took millions of years to create them and they are being used
up) and those that are renewable, in the sense that they can be readily replenished,
such as energy from the sun, which is expected to continue to shine at its present
brightness for at least one billion years more.
of the energy transition.
146
Energy
made in auto fuel efficiency in the United States. There was, in fact, some backslid.
improved, doubling in efficiency by 1985. During the 1990s no improvement was
ing. US auto makers, exploiting a loophole in the fuel economy law that allowed
them to classify minivans, sports utility vehicles (SUVs), and pickup trucks as “light
trucks” (a category of vehicles that had a lower fuel economy requirement than
did automobiles), produced many of these vehicles and heavily advertised them.
gallon, whereas automobiles averaged 28 miles per gallon. Some of the so-called
They became very popular. Their fuel efficiency was low, an average of 21 miles per
“light trucks” (which were really passenger vehicles) averaged 15 miles per gallon
or less, which was similar to the 14 miles per gallon that US autos averaged 25 years
earlier, before the first oil shock. With relatively low gasoline prices, and fading mem-
ories of the energy crisis, US auto makers and consumers prioritized fashion and
performance over fuel economy. 50
From the early 1980s to the early 2000s, the US automobile industry used its
improved technology to produce vehicles that had faster acceleration, were large
and heavier, and had slightly lower fuel economy. The average vehicle in 2002 had
nearly 100 percent more horsepower, accelerated nearly 30 percent faster, and was
also about 25 percent heavier. 1 Finally in 2007 the government instructed the auto
industry to improve the fuel efficiency standards of its new cars to 35 miles per gallon
by 2020, a significant improvement but still lower than many European, Japanese,
and Chinese autos. And in 2012, the United States had plans to improve fuel effi-
ciency standards to 55 miles per gallon by 2025.52
Most of the long-distance hauling of freight in the United States is by truck, and a
truck uses much more energy to move a ton of freight than does a freight train. The
US government, by its vast expenditure of funds on the interstate highway system
(reported to be the largest public works project in history), its much lower tax on
gasoline than in Europe and Japan, and its relatively small amount of expenditures
that benefit the railroads, has done much to promote the use of trucks over trains in
the country. This policy could be reversed.
In 1999, Japanese-made hybrid automobiles that used a gasoline engine and an
electric motor appeared on the market. These hybrid vehicles were highly energy
efficient and had low emissions. US companies followed suit in producing such cars
in the early twenty-first century, but they were expensive compared with conven-
tional cars.
Even a decade into the twenty-first century, governments continued supporting
the burning of fossil fuels with huge government subsidies. Throughout the early
2000s, payments to the fossil fuel industries fluctuated annually according to the
price of energy supplies, demand, domestic energy policies, and exchange rates. In
2008, when international energy prices were very high, subsidies were about 560
billion. By 2009, subsidies totaled about $310 billion, including about $125 billion
for oil products and $85 billion for natural gas. 54
The information about governmental support of the use of fossil fuels through
subsidies helped keep the price of fossil fuels low and is one of the crucial factors we
need to know when we examine in Chapter 5 – climate change – perhaps the most
important energy and environmental issue the world faces today.
Nonrenewable energy sources
Oil
, natural gas, coal, and uranium are the main sources of nonrenewable energy.
According to many analysts the world is not about to run out of oil, but within a
few decades shortages will become prevalent.55 The world’s demand for oil is now
growing 1 or 2 percent each year.56 Rapidly economically growing China and India
are already competing with the West for oil. Fracking, a new technology, has enabled
the United States to again become a major producer of oil and natural gas.
Canada has large deposits of tar sands from which oil can be extracted. In the mid-
2000s about 1 million barrels of oil a day were being extracted from the oil sands. It
is estimated that the tar sands hold as much as 175 billion barrels of oil, but it is
relatively expensive and environmentally destructive to extract.
Proven reserves of natural gas are estimated to be larger than oil reserves. Large
reserves exist in Russia, Iran, Qatar, and Saudi Arabia. Natural gas is the cleanest
fossil fuel, emitting 40 percent of the carbon dioxide emitted by coal. Europe now
uses natural gas for 20 percent of its energy, much of it coming from Russia. A quarter
of the energy in the United States now comes from natural gas and there are plans
to increase this. According to a well-known energy analyst, natural gas has become
the “fuel of choice” for meeting the needs for more electricity in both the developed
and developing countries. 57 Some energy analysts expect it to overtake coal and oil
as the most important fossil fuel in the world by 2025.58
Energy
147
The Energy Transition
The world is entering a period of transition from one main energy source –
principal
to a new
source or a variety of sources. This is the third energy transi-
oil –
tion the world has passed through: the first was from wood to coal, and the second
industrialized world must shift from its reliance on nonrenewable and dangerously
polluting fossil fuels to energy sources that are renewable and less polluting. Many
in the industrialized countries, but fewer in the United States, understand that their
dependence on imported oil must end since it is not a clean fuel, and neither is it
cheap, abundant, or secure. But what will be the new principal energy source for the
industries of the developed world and the new industries of the developing nations?
As in many transitions, the end to be reached is not clear. The only clear thing now
is that the present state of affairs is no longer viable. We are in the beginning years
For the rest of this section, we will examine some of the potentialities of the most
often discussed energy sources. Energy sources can be divided into those that are
nonrenewable (i.e., it took millions of years to create them and they are being used
up) and those that are renewable, in the sense that they can be readily replenished,
such as energy from the sun, which is expected to continue to shine at its present
brightness for at least one billion years more.
of the energy transition.
146
Energy
made in auto fuel efficiency in the United States. There was, in fact, some backslid.
improved, doubling in efficiency by 1985. During the 1990s no improvement was
ing. US auto makers, exploiting a loophole in the fuel economy law that allowed
them to classify minivans, sports utility vehicles (SUVs), and pickup trucks as “light
trucks” (a category of vehicles that had a lower fuel economy requirement than
did automobiles), produced many of these vehicles and heavily advertised them.
gallon, whereas automobiles averaged 28 miles per gallon. Some of the so-called
They became very popular. Their fuel efficiency was low, an average of 21 miles per
“light trucks” (which were really passenger vehicles) averaged 15 miles per gallon
or less, which was similar to the 14 miles per gallon that US autos averaged 25 years
earlier, before the first oil shock. With relatively low gasoline prices, and fading mem-
ories of the energy crisis, US auto makers and consumers prioritized fashion and
performance over fuel economy. 50
From the early 1980s to the early 2000s, the US automobile industry used its
improved technology to produce vehicles that had faster acceleration, were large
and heavier, and had slightly lower fuel economy. The average vehicle in 2002 had
nearly 100 percent more horsepower, accelerated nearly 30 percent faster, and was
also about 25 percent heavier. 1 Finally in 2007 the government instructed the auto
industry to improve the fuel efficiency standards of its new cars to 35 miles per gallon
by 2020, a significant improvement but still lower than many European, Japanese,
and Chinese autos. And in 2012, the United States had plans to improve fuel effi-
ciency standards to 55 miles per gallon by 2025.52
Most of the long-distance hauling of freight in the United States is by truck, and a
truck uses much more energy to move a ton of freight than does a freight train. The
US government, by its vast expenditure of funds on the interstate highway system
(reported to be the largest public works project in history), its much lower tax on
gasoline than in Europe and Japan, and its relatively small amount of expenditures
that benefit the railroads, has done much to promote the use of trucks over trains in
the country. This policy could be reversed.
In 1999, Japanese-made hybrid automobiles that used a gasoline engine and an
electric motor appeared on the market. These hybrid vehicles were highly energy
efficient and had low emissions. US companies followed suit in producing such cars
in the early twenty-first century, but they were expensive compared with conven-
tional cars.
Even a decade into the twenty-first century, governments continued supporting
the burning of fossil fuels with huge government subsidies. Throughout the early
2000s, payments to the fossil fuel industries fluctuated annually according to the
price of energy supplies, demand, domestic energy policies, and exchange rates. In
2008, when international energy prices were very high, subsidies were about 560
billion. By 2009, subsidies totaled about $310 billion, including about $125 billion
for oil products and $85 billion for natural gas. 54
The information about governmental support of the use of fossil fuels through
subsidies helped keep the price of fossil fuels low and is one of the crucial factors we
need to know when we examine in Chapter 5 – climate change – perhaps the most
important energy and environmental issue the world faces today.
Nonrenewable energy sources
Oil
, natural gas, coal, and uranium are the main sources of nonrenewable energy.
According to many analysts the world is not about to run out of oil, but within a
few decades shortages will become prevalent.55 The world’s demand for oil is now
growing 1 or 2 percent each year.56 Rapidly economically growing China and India
are already competing with the West for oil. Fracking, a new technology, has enabled
the United States to again become a major producer of oil and natural gas.
Canada has large deposits of tar sands from which oil can be extracted. In the mid-
2000s about 1 million barrels of oil a day were being extracted from the oil sands. It
is estimated that the tar sands hold as much as 175 billion barrels of oil, but it is
relatively expensive and environmentally destructive to extract.
Proven reserves of natural gas are estimated to be larger than oil reserves. Large
reserves exist in Russia, Iran, Qatar, and Saudi Arabia. Natural gas is the cleanest
fossil fuel, emitting 40 percent of the carbon dioxide emitted by coal. Europe now
uses natural gas for 20 percent of its energy, much of it coming from Russia. A quarter
of the energy in the United States now comes from natural gas and there are plans
to increase this. According to a well-known energy analyst, natural gas has become
the “fuel of choice” for meeting the needs for more electricity in both the developed
and developing countries. 57 Some energy analysts expect it to overtake coal and oil
as the most important fossil fuel in the world by 2025.58
Energy
130
grass
A human being, a skyscraper, an automobile, and a blade of g
energy that has been transformed from one state to another.
all
Jeremy Rifkin, Entropy (1980)
represent
The Energy-Climate Crisis
Are we running out of energy? Of course not. Everything is made out of energ
and, as college students learn when they study the laws of thermodynamics in th
introductory physics courses, energy cannot be destroyed. These laws also state tha
energy cannot be created: all we can do is to transform it from one state to another
the energy is changed from a more useful to a less useful form. All types of energy
And when energy is transformed, or in other words, when it is used for some wo
eventually end up as low-grade heat. A “law” in the physical sciences means tha
there are no exceptions to it, and there are none to the laws of thermodynamics!
So if everything is energy and energy cannot be destroyed, why is there an energ
crisis? The crisis has come because of the other laws, the laws that tell us that e
cannot be created, and that, once used, it is transformed into a less usable form. At
present, the industrialized world relies on a very versatile, although polluting, fel.
carbon, especially in the form of oil for transport and coal for electricity.
economic
Countries are facing an energy crisis because they can no longer depend on the
dant supplies of cheap energy from traditional sources, which generate massive
emissions of carbon dioxide (CO₂) and other pollutants. Unprecedented e
growth and material prosperity took place in the United States during the 1950s
and 1960s, and this was made possible, in part, by cheap energy. Largely by defanik
this became the “model” for development, where individual lifestyles and modes of
industrial production were based on plentiful, inexpensive, polluting energy.
Oil is being consumed at prodigious rates – about 90 million barrels a day wer
produced in 2013.² Yet its supply is controlled by a limited set of producers, and its
price has fluctuated greatly. Table 4.1 shows this fact as well as any set of figures can,
as it focuses on the changes in the price of gasoline in the United States from 1950
to 2009. The table also helps us understand another important feature of the energy
crisis, especially as it has affected the United States. The period of cheap gasoline was
a relatively long one, and people in the United States got used to having an economy
based upon inexpensive petroleum products. When oil prices skyrocketed in the
1970s, the shock to the US economy and to the economies of many other countries
was profound.
The first oil shock took place in 1973 and 1974. The 1973 Arab-Israeli war led a
number of Arab oil-producing countries to stop shipping oil to the United States and
other countries allied with Israel. American motorists lined up at gas stations, vying
for limited supplies. The Organization of Petroleum Exporting Countries (OPEC),
of which most oil-exporting nations are members, seized the opportunity to raise oil
prices significantly, and prices quadrupled.
The second oil shock came in 1979 and 1980. The event that prompted this shock
was the Iranian Revolution and the ousting of the Shah as the head of the Iranian
Table 4.1 US gasoline prices, 1950-2009
Year
1950
1960
1970
1980
1990
Energy
2000
2009
131
Retail price per gallon of regular gas ($)
0.27
0.31
0.36
1.21
1.16
1.69
2.35
Sources: Data from “Dollars and Sense, July-August 1980,” in Kenneth Dolbeare, American Public
Policy (New York: McGraw-Hill, 1982), p. 113; The World Almanac and Book of Facts 2006 (New
York: World Almanac Books, 2006), p. 138; US Energy Administration, Monthly Energy Review
(October 2010), p. 122.
government. Iranian oil shipments to the United States stopped, but the real shock
came when OPEC doubled its prices. Many North Americans had refused to believe
there was a real energy crisis after the first oil shock and had returned to their nor-
mal high consumption of petroleum products after the Arab embargo was lifted; but
the second oil shock convinced most people that there was indeed an energy crisis.
While many had blamed either US oil companies or the US government for creating
the first oil crisis, the second shock clearly demonstrated that something had fun-
damentally changed in the world. What became apparent to many now was that the
United States, and most other developed nations, were dependent on one section of
the world for a significant part of their energy, and that they could no longer control
events in that part of the world.
The large increases in the price of oil made by OPEC in the 1970s led to a
massive transfer of wealth from the developed nations to part of the developing
world. In the words of one commentator, “It may represent the quickest massive
transfer of wealth among societies since the Spanish Conquistadores seized the
Incan gold stores some four centuries ago.” Higher oil prices led to low economic
growth, higher inflation, big trade deficits, and increased unemployment in the
United States and other developed nations. Although developing nations use much
less oil than do the developed nations, the cost of their imported oil also went up
and caused some of them to acquire huge debts to pay for the oil they needed.
Daniel Yergin, the coeditor of an important report on energy from Harvard Busi-
ness School, assessed the potential consequences of the oil shocks in the following
terms:
The unhappy set of economic circumstances set in motion by the oil shocks contains the
potential for far-reaching crises. In the industrial nations, high inflation, low growth,
and high unemployment can erode the national consensus and undermine the sta-
bility and legitimacy of the political system. In the developing world, zero growth
leads to misery and upheavals. Protectionism and accumulation of debt threaten the
international trade and payments system. And, of course, there is the tinder of inter-
national politics, particularly involving the Middle East, where political and social132
upheavals can cause major oil disruptions and where fears about and threats to energy
supplies can lead to war.”
Energy and security
The third oil shock came in 1990 and 1991. Iraq invaded Kuwait and threatened
Saudi Arabia. In order to prevent Iraq from becoming the dominant power in the
Middle East and having significant influence on the production and pricing of ol
from that region, the United States led a coalition of forces in driving Iraq out of
Kuwait. The war, which lasted just six weeks, involved half a million US soldiers
and token troops from other nations. A huge, sustained air attack on Iraqi forces in
Kuwait and Iraq and on military facilities in Iraq (including on plants for poisonous
gas and nuclear weapons) preceded the ground attack. The allied forces had few caso
alties, but the retreating Iraqi forces, which suffered large casualties, sabotaged more
than 700 oil wells in Kuwait, setting about 600 on fire.
The United States persuaded other developed nations, including Japan, to con-
tribute about $50 billion to help pay for the war. The United States spent about
$10 billion for short-term costs. The war and its subsequent damage to their lands
and economies cost all the Arab states an estimated $600 billion. The price of d
increased dramatically right after the Iraqi invasion of Kuwait, but by the end of the
war the price had dropped back to the prewar level. That price did not reflect the red
cost of oil, which should have included the cost of the war. (It has been estimated that
by the mid-1980s the United States was spending seven times as much keeping the
shipping lanes open to the Middle East oil fields as it was for the oil itself.)
36 E
Iraq
Mediterranean
Sea
CYPRUS
LEBANON
ISRAEL
WEST
BANK
JORDAN
MAPQUEST
Map 4.1 Iraq
TURKEY
SYRIA
Sy
D e
Euphrate
40 E
ian
se
Energy
0
0
t
90 Miles
90 Kilometers
SAUDI ARABIA
Babylon
Baghdad
Tigris
48° E
Basra
KUWAIT
-34° N
IRAN
30° N
Persian
Gulf
Energy
133
In 2003 the United States invaded Iraq and conquered the country after a rela-
tively short war. Its main public reason for doing so was to destroy weapons of mass
destruction, which the United States claimed Iraq possessed. No weapons of mass
destruction were ever found and the United States later stated that faulty intelligence
led it to believe Iraq had such weapons. A few allies of the United States supported
the invasion-mainly the United Kingdom – with relatively small military forces,
but the invasion was opposed by most nations of the world. It created intense hos-
tility toward the United States in the Arab world. Many nations believed the main
reason for the war was to help the United States secure its sources of oil, although
some believed that President George W. Bush had personal reasons for wanting to
depose the Iraqi president Saddam Hussein.
The Middle East, which supplies much of the oil imported into the United States
and Western Europe, is a politically unstable area. It is torn by regional conflicts,
religious conflicts, social and ideological conflicts, and, in the past, by East-West
competition. A large amount of the oil involved in international trade is carried
on ships that must pass through a single strait in the Persian Gulf – the Strait of
Hormuz.
The United States has historically been the largest buyer of oil in the world. In
the past, much of it came from a single country, Saudi Arabia. Over the past two
decades, China became the fastest growing oil market in the world, buying more oil
from Saudi Arabia than the United States. But that growth seems to have slowed in
tandem with overall economic growth. Many Western European countries are even
more dependent on imported oil than the United States, as is Japan, the industrialized
country most dependent on imported oil, producing virtually no oil itself and having
few other domestic sources of energy.
This section has focused on the oil crisis, which has affected mainly the indus-
trialized nations. But that is not the full story of the energy crisis that the world
faces. Billions of people use very few fossil fuels at all, relying mainly on wood, char-
coal, cow dung, and crop residues for cooking fuel and for heat. In Africa alone,
730 million people use traditional sources of energy. The shortage of firewood in
the south of the African continent is increasing as population growth has caused
consumption of wood to exceed the growth of new supplies in many areas.
Now, due to climate change, experts are predicting that unless a breakthrough
technology enables fossil fuels to be burned with dramatically lower carbon emis-
sions, much of the existing oil reserves will need to remain untapped if the world is
going to avoid catastrophic climate changes. So not only does the price of oil impact
energy-intensive economies, but the availability and price of substitutes of cleaner
energy sources present new challenges to conventional development pathways.
Government Responses to the Energy-Climate Crisis
Let us look at a few key countries and regions to see how their governments have
responded to the energy crisis.134
Energy
Plate 4.1 Shortage of wood is a part of the energy crisis, since many urban dwellers in
developing nations rely on wood as their major source of fuel
Source: Ab Abercrombie.
The United States
The US energy sector remains overwhelmingly dependent on oil and coal, but that
is starting to change as natural gas (particularly due to fracking, see Chapter 8) and
renewable energy take up an increasing percentage of the market share, in part due
to efforts to limit carbon dioxide emissions associated with climate change. In 2013,
36 percent of US energy came from oil, 27 percent from natural gas, 19 percent from
coal (down 5 percent since 2008), 10 percent from renewable sources, and 8 percent
from nuclear electric power. 10
Historically, the United States has lacked a coherent energy policy, although a
number of laws dealing with the crisis have been passed, and in 2015 the US Envi
ronmental Protection Agency announced a suite of new regulations for coal-fired
power plants and other energy sources. In 1971 President Richard Nixon called for
“Project Independence” to make the United States self-sufficient in energy by 198
and in the late 1970s President Jimmy Carter stated that the energy crisis should be
considered the “moral equivalent of war.” By 2013, the United States was the world’s
biggest producer of oil (see Table 4.2), although about 40 percent of the oil con
sumed in the United States was still imported.” In 2010 the United States imported
most of its oil from Canada, followed by Mexico, Saudi Arabia, Venezuela, and
Table 4.2 Top world oil producers, 2013
Country
United States
Saudi Arabia
Russia
1
2
3
4
5
6
7
8
11
12
China
Canada
United Arab Emirates
Iran
Iraq
Mexico
Kuwait
Brazil
Energy
Venezuela
Nigeria
Qatar
Angola
Production (thousand barrels per day)
13
14
15
Source: United States Energy Information Agency (2015).
12,343
11,702
10,764
4,459
4,074
3,441
135
3,192
3,058
2,908
2,812
2,694
2,689
2,372
2,067
1,889
deral and state
Nigeria – in that order. Meanwhile, government agencies at the
levels began supporting policies to increase energy efficiency, reduce carbon emis-
sions, and promote lower-carbon fuels. But despite these efforts, oil and coal have
dominated US energy sources.
Why has it been so difficult for the United States to enact an effective policy to
deal with the crisis? Part of the reason is that the inertia of an oil- and coal-intensive
infrastructure is hard to overcome. The nation is used to abundance, in energy as
well as in material goods, and the creation of a new outlook and new values is not
Also very large economic interests, such as those of the oil companies, benefit
from the status quo and use their huge financial resources to influence government
policy on energy. They spend large amounts in elections supporting favored candi-
dates, benefiting from a 2010 US Supreme Court decision removing certain limits
on campaign funding by corporations, unions, and others.
easy.
The cost of oil in the United States, in one sense, remains very low. Gasoline, for
example, is about half the price in the United States as in Europe. What this means is
that the “real,” or true, cost of oil is not indicated by its price and thus consumers in
the United States feel no urgency in demanding – or the government in producing –
an energy policy that would break the dominance of oil in their society. As shown by
some energy analysts, the real cost of oil would have to reflect not only the military
costs necessary to secure it, but also the costs of the environmental degradation it
causes – such as the effect it is having on the Earth’s climate. Factoring in the full
cost of oil would include not only military and climate costs but also the increased
healthcare costs associated with the burning of petroleum, and the subsidies by the
government to the oil industry.The International Center for Technology Assessment once estimated that if the
price of gasoline reflected all the environmental, military, and health costs of using
gallon.12 Gasoline
it and subsidies to the oil industry, its price would be at least $14 ag
sales taxes can be used to cover some of these hidden costs – which otherwise are
borne by the whole society in their general taxes and in healthcare costs – but the
tax on gasoline in the United States has historically been much lower than that in
other major industrialized nations. 13 In March of 2015 the typical price of a gallon
of gasoline in the United States was under $3, approximately half of the price in many
European countries.14 But factoring out taxes, consumers in the United States paid
more for gasoline ($2.47/gallon before taxes) than in Europe (closer to $2 per gallon
pretax).
In 2007 Congress passed an energy law setting higher fuel efficiency standards for
cars and supporting more US-produced biofuels for automobiles, mainly from com
for the domestic market. Vehicles in the United States consume about 40 percent of
its oil consumption. And beyond fuel standards, by 2015 national and federal ini
tiatives were underway to limit carbon dioxide emissions from key sources such as
power plants, 15
136
Energy
Western Europe
Most Western European countries are more dependent on imported oil than is the
United States, although oil/liquid fuel consumption is projected to decline slightly in
the coming decades. 16 Traditionally, European governments have let the prices for
imported fuel go up as determined by the world market and have tried to encourage
energy conservation through the use of high taxes. France has emphasized nuclear
power as its response to the energy crisis, and by 2012 it was producing about
83 percent of its electricity from that source – one of the highest rates in the world.”
The discovery of oil and natural gas under the North Sea aided mainly Norway
and Britain. This large deposit allowed Britain to be self-sufficient in oil for several
decades, but production peaked in 1999 and has been declining since then. By 2004
Britain was importing more oil than it exported. 18 In 2012, 33 percent of Britain’s
energy came from natural gas, 37 percent from petroleum, 16 percent from coal
and 14 percent from nuclear and renewable and other sources, which tripled between
2000 and 2012.19 Norway, which is a major oil producer at the global level, never.
theless generates nearly all of its electricity from lower-emitting hydropower. In
2005 Finland began constructing one of the world’s largest nuclear reactors, but that
project has encountered many delays. The Finns were concerned with the growing
threat of global warming, their increasing dependence on unreliable areas for oil and
natural gas, and high and volatile energy prices.
Japan
Japan has no significant oil, natural gas, or coal deposits and, as stated above, in
the mid-1970s it was the most vulnerable of all industrialized countries to OPEC’S
Energy
137
quickly developed, after the first oil shock in 1973, that Japan’s
actions. A consensus
dependency on oil must be reduced. The government encouraged conservation and
increased efficiency in using energy and the people responded. By the end of the
first decade of the twenty-first century Japan had reduced its dependency on oil from
about three-quarters of its energy consumed in the mid-1970s to less than one-half.21
It is interesting to note some of the differences between Japanese and US societies
that have undoubtedly affected their different responses to the energy crisis. Because
of their history and their limited land and resources, the Japanese have always
assumed scarcity and insecurity of resources such as fuel, whereas the Americans
have been accustomed to abundance and have assumed it will continue. Japanese
industries have been traditionally more willing than their US counterparts to make
long-term investments, the American companies often being more concerned with
making short-term profits. The Japanese know that their goods must compete well
in international trade if they are to maintain their high living standards. Japan is used
to change and adaptation. The consensus that developed in Japan after 1973 empha-
sized a shift from consumption to restraint. It included a belief that the economy
had to shift to “knowledge intensive” industries that use relatively little
that energy efficiency was the key element in the adjustment the country needed to
make to this new situation. It moved quickly into knowledge-based and electronic
and computer-based industries.
energy,
and
Japan made significant progress in the period between the oil shocks in the 1970s
and the third one in 1990 and 1991. By 1990 the energy efficiency of the Japanese
economy had improved to such an extent that the production of goods and services
took only one-half the energy it took in the late 1970s.22 The increased efficiency in
the automobile and steel industries came after the government set ambitious goals
for them to reach.
Another action taken by the government after the early crises was to build large
oil storage facilities. By the early twenty-first century, Japan had nearly six months’
supply of oil in storage tanks, more than any other nation. The country also sought
to diversify its sources of oil, and was successful for a while, but it has consistently
relied on imported oil to supply much of its energy demands, with the vast majority
(over 80 percent) supplied from the Middle East.23 In 2013 the mix of Japan’s energy
sources was as follows: 44 percent oil, 27 percent coal, 22 percent natural gas, 1 per-
cent nuclear, and 6 percent hydroelectric and other renewables.2
The Japanese government made nuclear power one of the key parts of its plans
to reduce its dependency on imported oil. In 2007 Japan had 55 operating nuclear
power plants. Japan also planned to build a number of fast-breeder reactors to reduce
its dependency on imported uranium, and in the early 1990s it began importing plu-
tonium from France (recycled from spent uranium fuel from Japanese power plants)
for those reactors. By the early 2000s Japan had spent tens of billions on develop-
ing fast-breeder reactors that use plutonium as a fuel and, in theory, produce more
nuclear fuel than they burn.
In 1999, because of human error, an uncontrolled chain reaction occurred in a
Japanese nuclear fuel plant. Two people were killed and thousands were exposed
to moderate levels of radiation. Safety concerns were again raised in 2002 when138
Energy
power.25
allegations were made that the largest privately owned electric utility in Japan w
guilty of numerous serious safety violations in operating its nuclear power plants.
plants, were beginning to erode the public’s confidence in the safety of nuclear
Safety concerns, which include concerns with the aging of many of Japan’s 55 nuclear
In 2011 a tsunami (tidal wave) caused the cooling systems of a group of nuclear
reactors in northeast Japan to fail. This led to the release of large amounts of radia
tion into the air and sea and to the evacuation of nearby residents. As a result of the
Fukushima disaster, Japan’s energy mix has changed substantially. After the disaster,
Japan’s use of liquid fuels – such as petroleum – for energy generation increased by
22 percent in one year alone. 26 And by 2013, nuclear had declined to only 1 percent
of Japan’s total energy supply, 90 percent decrease below pre-tsunami levels 27
China
Although China’s energy situation is not typical because of its vast reserves of coal.
does have a typical problem: how to provide a growing population with enough
fuel in a manner that does not seriously harm the environment. China’s population
is so large, and its economy is transitioning at such a rapid pace, that its demand for
energy is huge. In 2009 it overtook the United States as the largest total user of energy;
China is also already the world’s biggest importer of coal.28 Beyond electricity use,
the transportation sector accounts for much of China’s projected growth in energy
consumption. Other parts of Asia are expected to follow suit.29
In 2011, coal supplied 69 percent of China’s energy demand. Despite a consider-
able commitment to increase renewable energy use, its current use of coal – the most
polluting fossil fuel-is now having a significant effect on the world’s environment.
By 2010, China was burning 3 billion tons of coal yearly, amounting to half of global
coal use.30 In addition to massive increases in energy consumption, China is also a
major energy producer, including commanding a full 45 percent of the world’s coal
supplies (the United States is the second biggest producer at about one quarter of
China’s yield), and its appetite for coal is so high that it also is the world’s biggest
importer of coal.31 China plans to reduce its coal use to 65 percent by 2017 and this
percentage of its overall supply is expected to continue to decline, although absolute
consumption will continue to increase.32
China has now passed the United States as the largest emitter of carbon dioxide
(CO₂), the main gas causing the changes in our climate, although its per capita emis
sions of this gas are still lower than those of the United States and some other devel-
oped nations. The country’s air pollution levels are now among the world’s highest.
This extensive air pollution and serious water pollution were major contributing fac-
tors in the World Bank’s rating of 20 Chinese cities among the 30 most polluted cities
in the world.33 Linfen, China, has been called the world’s most polluted city.
Most of China’s coal is situated in the northwestern part of the country, far from
the eastern coastal provinces where much of the new economic growth is taking
Energy
139
place. Tens of thousands of factories in the eastern provinces are experiencing seri-
ous energy shortages and must either shut down or limit their production at times.
Energy shortages even led some cities such as Shanghai – to try to modify the
weather in an effort to reduce the demand for electricity.
China, now the largest user of energy in the world, is in a very energy-intensive
period of its development as it focuses on manufacturing and exporting material
goods. Two-thirds of China’s electricity use is for industry. As China continues to
industrialize and living standards rise, there is concern about where the new energy
will come from. Here are some of the steps China is taking to try to meet the growing
demand for energy:
34
1 China built the world’s largest program to create methane gas for use as fuel in
rural areas. The gas is produced by fermenting animal and human wastes in sim-
ple generators; after the gas is produced, a rich organic fertilizer remains which
can safely be used on crops.
2 China was self-sufficient in oil until the mid-1990s. Its use of oil is now grow-
ing rapidly. It is making large investments in foreign oil-producing nations from
Sudan to Venezuela, and even tried, unsuccessfully, to buy an independent Amer-
ican oil company. In the 1990s, the Chinese economy grew at an amazing 10 per-
cent a year, lifting millions of people out of poverty, while the new wealth created
a demand for middle-class goods such as cars. The Chinese market for new cars
is now the second largest in the world, only surpassed by the United States. The
demand for cars is growing about 20 percent per year, putting new pressure on
the government to increase its supply of oil.35 China established higher fuel effi-
ciency standards on its cars compared with the United States, but to save money
China was importing so-called “sour” or “dirty” crude oil with much higher sul-
fur content than is allowed in Europe or the United States.36
3 China plans to increase its number of nuclear power plants, starting construction
on as many as an additional ten each year. In 2010, it already planned to have in
the next decade about three times the number of nuclear power plants as the
rest of the world, located mainly in the industrial coastal areas. Since many of
these plants will be located near large cities, safety concerns have been raised with
this rapid expansion.37 One nuclear energy expert at the Chinese Academy of
Sciences said in 2005: “We don’t have a very good plan of dealing with spent fuel,
and we don’t have very good emergency plans for dealing with catastrophe.”
While plans may have improved, this underscores the manner in which rapidly
scaled-up demand for electricity may be occurring without full considerations of
the longer-term consequences and potential impacts.
>>38
4 China plans to significantly expand its renewable energy sources, such as solar
and wind power, small hydroelectric dams, and biomass using plant and animal
wastes. China’s Twelfth Five-Year Plan set a course for the country to generate
15 percent of its energy from nonfossil fuel sources by 2020.39 Its emphasis at
present is on wind power, which it is significantly expanding in numerous windy
areas from Inner Mongolia to the eastern coast.40140
Energy
The Effect of the Energy-Climate Crisis on Countries’
Development Plans
The early stages of industrialization are energy intensive. Modern transportation sys
tems, upon which industrialization rests, utilize large amounts of energy, as does the
construction industry. The huge increase in oil prices in the 1970s cast a cloud over
the development plans of many developing nations. Most of these plans were based
upon an assumption that reasonably cheap oil would be available, as it had been for
the West, to support their industrialization. Most of the developing countries have
little or no coal or oil themselves. The development plans called for these countries
to export natural commodities, nonfuel resources, and light manufactured goods; it
was assumed that the earnings from these exports would be sufficient to pay for the
fuel they would need to import. The success of the development plans also depended
upon the countries being able to generate enough capital locally so that funds for
investment in businesses would be available.
When OPEC increased fuel prices, no exceptions were made for the poorer coun-
tries; they were required to pay the same high prices for their oil imports as the rich
nations had to pay. Added to that burden was the one created by the global reces-
sion, which the higher oil prices had helped to create. As the recession deepened in
the West, the industrialized countries cut back on their imports from the developing
nations. Many of these countries borrowed heavily from commercial banks to pay
for their higher oil bills and accumulated staggering debt. The foreign debt of the less
developed countries in the mid-1990s rose to about $1.9 trillion. Brazil incurred the
largest foreign debt of all the developing nations, over $150 billion, in the mid-1990s.
One way Brazil subsequently reduced the amount of oil it needed was by using its
huge sugar-cane wastes to produce alcohol (ethanol), which can be mixed with or
substituted for gasoline, and produces less pollution than gasoline. At the end of the
first decade of the twenty-first century, Brazil was exporting biofuels and petroleum
products.41
The new situation created by high oil prices has led some experts to talk more
about the energy needs of the world’s poorest nations. Countries such as Bangladesh
have few natural resources of their own and little ability to purchase the expensive oil
supplies to enable large-scale industrialization. The least developed nations, some-
times called the “poor poor,” have little prospect of developing along the path fol-
lowed by the West, especially given the rising concerns of fossil fuel contributions
to climate change. These nations are increasingly facing challenges in pursuing a
development path radically different from the one followed by historically wealthy
nations that developed their economies through cheap and abundant combustion of
fossil fuels.
Many experts predict that the largest increase in demand for oil in the coming
years will come from increasingly industrialized economies with large populations-
such as China and India – and not from historically “developed” nations, which have
mostly stabilized their energy use and are becoming
more energy efficient.
Population pressures and the high cost of oil are increasing the demand for tra
ditional fuels in the Global South. This problem has been mentioned above and it
40P
del
Warnto Fa
VINAROD
Energy
141
Plate 4.2 The replacing of human-powered vehicles with oil-fueled vehicles in poor and
crowded countries, such as Bangladesh, will be difficult
Source: World Bank.
contributes to the pressures discussed further in the section on deforestation in
Chapter 6. As firewood becomes expensive or unavailable in rural areas, people
switch to burning dried cow dung and crop residues, thus preventing important
nutrients and organic material from returning to the soil.
The Relationship between Energy Use and Development
A shift in types of energy
One way to study the progress of the human race is to focus on the way humans
have used energy to help them produce goods and services. People have constantly142
Energy
sought ways to lighten the physical work they must do to produce the things they
need- or feel they need to live decently. The harnessing of fire was a crucial step
in human evolution, as it provided early humans with heat, enabled them to cook
their foods, and helped them to protect themselves against carnivorous animals. Next
important supplement to
came the domestication of animals. Animal power was an
human muscles, enabling people to grow food on a larger scale than ever before,
Wood was an important energy source for much of human history, as it still is for a
large part of the world’s population. The replacement of wood by coal to make steam
in Britain in the eighteenth century enabled the Industrial Revolution to begin. In the
late nineteenth century oil, and in the early twentieth century natural gas, began to
replace coal since they were cleaner and more convenient to use. Oil had overtaken
coal as the principal commercial energy source in the world by 1970. In the 1970,
nuclear power was introduced and was producing about 5 percent of the world’s
energy by 2012, down from its peak since the 2011 Fukushima incident in Japan.
Increased use
The use of energy in the world has increased dramatically in the years since the end of
World War II in 1945, a period of rapid development in the industrialized countries
and one marking the beginning of industrialization in a number of developing coun-
tries. Figure 4.1 shows this well. Up through the end of the twentieth century, most of
the increased energy use took place in the developed nations, but that trend changed
by the twenty-first century. Figure 4.2 shows the world’s supply of energy by type in
more recent decades. In 2012 fossil fuels made up about 82 percent of the energy
used, with oil about 31 percent, coal about 29 percent, and natural gas about 21 per-
cent. Nonfossil fuels – mainly hydroelectric, nuclear, geothermal, biomass, wind, and
solar – accounted for about 18 percent of energy production in 2012.
Table 4.3 shows per capita and total electricity consumption by region of the world.
Consumption per capita and as a total tell different sides of the story. For example,
per capita, the Chinese burn less coal (the most polluting fossil fuel) than North
Americans do, but the total amount of coal used in China is twice that used in the
United States. 42
The decoupling of energy consumption and economic growth
Historically, there appeared to be a one-to-one relationship in the United States
between economic growth and energy growth; for example, a 10 percent increase
in the amount of goods and services produced in the country was
s accompanied by
an approximately 10 percent increase in the amount of energy consumed. But the
oil shock of 1973 seems to have broken this relationship. Between 1977 and 1985
the US economy grew about 30 percent but the amount of oil used dropped nearly
20 percent.43 What happened was that the United States began to use energy much
Annual consumption
10
8
0
1850
