0.15 Natural capital: energy

This chapter covers significant aspects of energy utilization energy technologies and production. We defer the discussion of the role of energy use in global climate change to Chapter 17.

Hydrocarbon energy: oil and gas, coal

Attitudes towards energy endowments vary considerably. By the 21 ^st century, some including several in academia, began to view large endowments of energy resources as a “curse.” Indeed, one label long applied to overdependence on oil and gas has been “Dutch Disease” The term first appeared in the 1970s, when Holland began to exploit very large reserves of natural gas in the North Sea. For several years after exports began, unemployment rose in Holland. : the effects of oil exports on reducing total employment and increasing inflation in exporting nations. Dutch disease has indeed adversely affected Nigeria, Venezuela and several other nations.

Elsewhere, people and their leaders hope for discoveries of energy resources that might bring future prosperity. Fortunately, the so-called energy curse is not at all inevitable. Energy itself is not the culprit (see Chapter___). Any “curse” arises from (a) the unwise utilization of revenues from energy resources, especially when accompanied by the corruption and/or economic repression associated with such major oil exporters such as Nigeria or Venezuela; (b) Bad economic management: perverse government policies that cause inflows of oil revenues to adversely affect foreign exchange rates and therefore non-oil exports especially labor-intense exports; and (c) Finally the absence of policies that require large chunks of natural resource revenues to be put aside for the benefit of future generations, as in Norway, Alaska and Chile (copper). By mid-2014, Norway with a population of only 5 million had accumulated funds exceeding $850 billion in oil-fed trust funds, available to future generations of Norwegians.

In any case, attitudes toward energy endowments have differed greatly, both across and within countries.

Consider a 1973 statement by Golda Meir, the 4 ^th Prime Minister of Israel.

“Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil.”

On the other hand, Saudi Arabia has truly immense reserves of oil and gas. But consider an entirely different point of view, set forth by Sheik Yamani, the Saudi Arabian Minister for Energy in the early eighties.

"I wish we had struck water."

Actually, Mrs. Meir spoke too soon. Huge deepwater gas deposits were discovered in 2010 in the Mediterranean Sea in Israel’s waters. Two fields hold about 28 trillion cubic feet of gas. The gas began flowing on March 31, 2013. The Prime Minister in 2014 Benjamin Netanyahu has called it “Manna from heaven.”

The evolving outlook for world energy

The world energy picture and outlook in 2014 is vastly different from that prevailing a half century earlier. In the sixties, seventies and even later, there was a widespread consensus among oil and gas specialists that the world’s oil production would peak, probably by the seventies, and then begin to steadily decline thereafter. The first of the well known prediction of “peak oil”, was a Shell Petroleum geologist M. King Hubbert. Even as late as 2005 industry leaders such as T. Boone Pickens asserted that global oil production would peak at 84 million bbl/d. By 2013, production reached 90 million bbl/d, and was still rising in 2014. This conviction attracted even more adherents when world oil output did peak temporarily in the mid-1970s.