The South African Civil Society Information Service

The Oil Crisis and the Search for a New Way of Living

By Saliem Fakir · 9 Sep 2008

We live in interesting times that promise both peril and opportunity. Things have changed so fast within the span of just a year that it's putting a strain on our ability to adapt.

It took five years from 2002-2007 for the oil price to go up by $60/barrel; but in the last 12 months, the price of oil surged by an additional $70/barrel.

The surge in oil prices is making life for everybody uncomfortable, as its ripple effects are being felt throughout the global and South African economies. It has, however, brought home the urgency to find solutions. The whole world is in the throes of a massive cycle of innovation. There lie two possible pathways before us.

A whole new generation of sustainable living options are being pushed into the market, having once sat on shelves gathering dust. This is a good thing. Within that market too, different models of sustainable living are competing with each other. These models vary from extending the life of the existing system, to seizing the opportunity to make radical changes to the current system – making it more durable, flexible and sustainable.

The first speaks to continued high growth economies, with centralised economic hubs and energy systems. The other speaks to economic growth paths based on need rather than excess, with localised economic systems and sources of energy.

Two visions that may see themselves exist in one form or the other either side by side with each other or in conflict with each other.

Oil will most likely reach $200/barrel and pressure to find solutions will exert themselves over us for a long time to come.

There are number of reasons for the high oil price. The US is stockpiling oil up to one billion barrels in a huge underground reservoir called the special petroleum reserve and some have suggested that this has contributed to 30 percent of the price surge.

Investors hedging against supply shortages in the future are also having an impact because they are pricing the future value of oil into the present. Swing states like Saudi Arabia would usually increase the supply of oil if prices went too high, but are unable to do so because demand is exceeding production capacity.

There will have to be a trillion dollars worth of new investment in infrastructure to increase oil supply within the next ten years. Therefore, a dive in the oil price in the immediate future is unlikely.

Peak oil pundits suggest that the surge in price may be a sign that we have already reached peak oil. There are opposing views of course. Those who are opposed to alarmist predictions seem to think we have enough oil to last us till 2070.

Those who believe there is enough oil in the ground argue that the high oil price is doing the opposite – increasing the oil reserve and expanding the life span of oil. They point to the fact that the profitably of extracting oil that was previously unrecoverable has improved. Explorations are increasing. Everyday there are new finds.

Most recently, Brazil’s state-owned oil company, Petrobras, announced that it discovered a huge new offshore oil field off the coast of Rio de Janeiro state. It is estimated that the field contains 700 million barrels of crude.

Similar finds are being made in Africa – some estimates suggest that there are potentially 100 million barrels of oil available from African fields, whereas previously it was thought that only 13-20 million barrels were available. The high oil price also makes it possible to produce oil from non-conventional sources like coal, tar-sands, oil shale and natural gas.

There are also biofuels. While first generation biofuels are problematic; world production in biofuels is unlikely to taper in the immediate future. Biofuel may provide some flexibility in terms of fuel options, for the interim, however it will never be the final solution due to shortages of land, water and competition with food demand. 

The promise of second-generation biofuels from cellulosic processes is a few years from being commercially viable. The technology remains unproven for large-scale production. Some even talk of a ‘glucose economy’ replacing our oil economy in which the common monomer sugar is turned into fuel and used for other purposes like bioplastics.

There is a half-truth in both the peak oil and non-peak oil debate. In the past we had large supplies in light sweet crude, which is easier to refine.

The light stuff is fast drying up with the supply in the heavier sulphur dirty oil coming more and more into the market. This requires additional refining if you want special ‘cleaning’ - which the current refining capacity is unable to do sufficiently to meet demand.

Peak oil or no peak oil, we are seeing a similar resurgence in investments in renewable energy sources, as was the case in the 1970s when the world faced an oil crisis after the formation of the Organization of Petroleum Exporting Countries (OPEC). The splurge lasted, then, for a short while and over the years, subsidies and investments in renewable energy declined relative to what was available for conventional sources of power.

This time it looks like the search for alternatives is here to stay for a long time. Both private and public sector investments have grown exponentially in the last five years. Prudent countries are taking no chances. Energy security has become synonymous with national security.

Much of the resurgence in innovation in new technology is coming from countries that were once producers of oil, but are now net importers: the US and China are leading the way. European countries have also increased investment, research and development.

Three main technologies stand out: wind, solar and biofuels. The world’s capacity in wind power is growing at 30 percent per annum. This year wind power generation will have reached 100 gigawatts.

As more wind turbines litter the landscape, the incentive to improve the technology increases. Wind turbines can reach levels of efficiency of about 50 percent and costs have come down radically to about eight US cents a kilowatt hour.  Similar levels of efficiency and new innovations are being made in solar energy.

Two key technologies will offer new pathways to mass-scale production and roll-out of solar energy: concentrated solar power using large arrays of mirrors or troughs to concentrate power where the heat is used to generate steam and run a turbine, and the other is thin film solar, which promise massive cost reductions and greater flexibility in the usage compared to crystalline silicon photovoltaic cells. 

Rapid innovations will also be in the offering with the biggest consumer of oil – cars. The conventional car is already outdated. Fuel prices are already driving consumer choices – people want lighter and more energy efficient cars.

The variations are likely to be: flexi-fuel cars like in Brazil, hybrid and electric cars like the Prius produced by Toyota, and pure electric cars run on sophisticated new age battery packs in which you simply plug-in you car in an electric socket at night and drive in the morning. 

South Africans are not immune to the energy pinch.  We are too dependent on oil and the lack of a good public transport system makes us very dependent on cars and so vulnerable to oil shocks, as we are experiencing at present. This vulnerability will not be met with increased conversion of coal to fuel nor biofuels. In the case of biofuels the investment climate in South Africa is not promising. We shouldn’t expect any mass-scale production of biofuels in the next five years.

There is a crisis of mobility looming. It can only be solved in two ways: heavy public intervention in provision of public transport and citizens’ solutions involving car-pooling, increased use of bicycles and even scooters. Scooters are already a big phenomenon in Port Elizabeth. Smaller towns are more likely to see growths in the use of bicycles and scooters. In the longer-term, the private markets will provide more energy efficient cars and South Africans will possibly see greater numbers of lighter vehicles, hybrids and electric cars being sold in our market.  

We are also very dependent on coal for our electricity – 90 percent of it. We are under pressure to reduce our dependence on both. Coal generates huge amounts of green house gases and South Africa will come under pressure to reduce our carbon dioxide footprint in the future. Besides the green house gas problems, we also have a shortage of electricity in the interim.

Despite the fact that Eskom will be putting up 100MW of wind-power and is considering a 100MW concentrated solar power plant in the Northern Cape. There is a need for more investment in renewable energy to improve our energy mix and reduce our carbon footprint.

Solar power, such as solar water geysers, is still to take-off on a mass-scale.  These require new building codes and municipal by-laws together with better subsidies for solar geysers to be more widely adopted by citizens in the country.

Solar water heating systems fall under a wider energy efficiency drive. South Africa’s energy usage intensity is still too high. The lowering of this energy usage will require much stronger government, private and citizens’ wide action.

While we are all in this together with the big wide world, the dependence on a central energy system makes individual citizens vulnerable to failures and constraints that may emanate from a central supply system. While the rich may, with time, be able to absorb the shocks, the poor are less capable of doing so. The poor are already suffering energy shortages as a result of their inability to pay for energy.

There are three fronts that need to be fought for: 1) better policy on the energy mix so that there is a good balance between central and local supply; 2) more incentives for citizens to install autonomous energy systems even if it partially meets their needs; and 3) greater neighbourhood, community or institutional actions from universities, firms and others to engage the energy challenge at the micro-level where there is less reliance on central government to provide all the innovation and solutions.

The oil crisis can be a wonderful opportunity for citizens' action and energy security. It requires a change of mind-set. Part of that change is to so say: ‘I too can do something about it’.

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