Wednesday, May 11, 2005

Peak Oil - A Messiah?

For decades, since they got control over world oil prices, OPEC has kept oil prices high, limited by only one factor: preventing the rise of renewable sources of energy. This fact is even more obvious now, when the high cost of oil is making renewable sources look more attractive than ever before - and importantly fueling a lot of research.

Renewable sources have two promises:
1. They come theoretically free. Just like you have to drill for oil and set up the infrastructure, you have to set something up for wind, solar or ocean power generation. However as the days, months and years go by, the cost of getting oil out, increases, whereas the cost of getting power from renewable sources comes down (the source is still free, inflation and depreciation do the rest). As research goes on, and equipment gets mass-produced, the cost of the initial equipment will also come tumbling down.
2. They last forever and dont pollute. Forever is a very long time, but for us it is simply the foreseeable future. Or at least till commercial nuclear fusion becomes a reality. Then one glass of water will power New York City for a week (ok that dialog was from the movie Chain Reaction!). But if we can keep up the current pace of research, nuclear fusion might not even be needed any more.

Together these two promises could easily drive the OPEC thugs out of business relevance and into perpetual obsolence. If we stop using petroleum for fuel and only for petrochemicals, India would be easily self-sufficient in petroleum, and so would most of the world. In any case the cost of your mobile phone would probably not increase even if the cost of petroleum went up five or ten times - it is that insignificant.

OPEC consciously kept the price of oil at absurdly high levels, but just low enough to discourage research into commercial usage of renewable sources of power. Then 2004 happenned, when people all over the world began to talk of Peak Oil, saying that production of oil had peaked the world over, and now production would stagnate and decrease, leading to $100 or $150 per barrel. Unlike previous oil price spikes, this one was not created by OPEC, but rather by production constraints.

I personally disagree with that assumption. OPEC nations have enough oil to double production any time they want. The problem is that they would have to invest billions to do that, and once they do that, the price of oil might come tumbling down to half. The tumble might even happen just on the announcement that they want to do that. But that is not the point.

If OPEC decides to sit back and enjoy the high prices, and they are content to do that for just 5 more years, I think energy utopia would be upon us. Wind power should get cheaper than fossil fuel power some time this year, which should see an exponential increase in wind power generation. Ocean tidal power is far more promising than wind power, and at the current rate of research should be at least as economical in 3(?) years. Between 5 and 7 years from now, a major technological break is likely to make commercial production of solar hydrogen a reality. In addition we have a slew of other path-breaking technologies, some of which have been reported on this blog, which are likely to make their presence felt in the near future. Just five more years then.