Energy is the essence of modern civilization. It is often associated with economic development, geo-politics, energy security, and until recently environment and climate change issues. I have always been very interested in energy issues, especially the energy politics. Let alone the debate of climate change, I used to believe renewable energy should be THE answer to all these energy problems and conflicts emerging around the globe, to which I even dedicated my Master thesis. But after working in the renewable energy sector for several months, I start to realize that the reality is far from the Utopia I pictured in the first place, that the role of fossil fuel in our energy portfolio is unlikely to be challenged in the short run. Having said that, I do hope this oil/gas pattern could change, that our economy could be absolutely decoupled from the consumption of fossil fuel. The sole reason why I would like that to happen is that I hope one day we could stop giving the oil money to the middle east to fund jihadists around the world. Meanwhile, it is important to realize that renewable energy could power up your house, but not your factories and the whole city (except for large hydro power). So there’s need for a replacement for a central energy source for fossil fuel in power plants, industrial process, and transportation, which in my perspectives lies in the future of ITER. However, the reason I am bringing the topic of energy is neither about nuclear debate nor renewable energy leap-forward campaign, but simply about the good old fashion oil issues.
Yesterday IEA, an organization that was set up exclusively to counter-balance the influence of oil producing countries in the 1970s, announced that it will release the oil reserves to the market to curb the increasing oil price – mostly due to the turmoil in Libya, from its Strategic Petroleum Reserve (SPR). 60 million barrels from SPR will flow to the market as a defensive measure to maintain the oil price at lower level, after OPEC, an oil producing cartel refuse to increase its oil production in a recent meeting. IEA claims that a skyrocket high oil price would bring adverse effects on most fragile and crumbling oil-consuming economies that barely got recovered from the economic crisis 3 years ago. While OPEC certainly did not share the same vision, for the third time IEA started to use its own SPR to affect the market and show OPEC that suppliers are not the only one who got the power in this oil game. The last two times where IEA used its SPR, the most powerful arm of IEA that was ever designed for, were 1991 during the Gulf War and 2005 when Hurricane Katrina disrupted the Mexican gulf and blew away New Orleans. Coincidentally, both decisions were made under the Bush family. Once again, IEA initiated its SPR yesterday, but under rather odd circumstance compared to previous ones.
First of all, the oil price nowadays were around 100 USD per barrel, not even close to the price in early 2008 – almost 140USD per barrel, which did not really trigger the release of SPR reserve at that time. Major oil producing country Saudi Arabia even publicly claim to share the concern of western oil consuming countries that it might increase its daily production unilaterally, albeit OPEC made the decision not to follow. From simple demand and supply point of view, it does not really constitute an emergency situation that could trigger the use of SPR. Lots of people are therefore interested in digging out the real political incentives of such moves, most of them circulating on the role of Obama administration; others are questioning the capability or SPR release and its effectiveness on the global oil price. While most of debate seems to target conflicts in between the oil producing and consuming economies, I tend to intepret this move in a broader picture of global energy politics.
Looking at current international energy landscape, it is no longer a dichotomy between oil producing OPEC and oil consuming IEA. In terms of energy market, on one hand nowadays we have Asian countries like China and India who are engulfing huge amount of fossil fuel to satisfy its exponentially-growing economic appetite, who remain non-OCED members and thus not within the IEA club. On the other hand non-OPEC countries are taking up more share in the global oil production, let alone Russia being the biggest single oil producing country by far, suppressing all other OPEC nations. This will nevertheless dilute the impacts of IEA-OPEC conflict, however, it also means that the IEA-OPEC energy war will extend to other parts of the world in a significant magnitude, due to the increasing involvement of other new players on the table. In this sense, neither IEA nor OPEC should have the legitimacy or the power to claim hegemony in the global oil politics. At least it determines that the actions like SPR release or OPEC refusal to increase the production would have diminishing impacts on the overall oil price on the market. At the same time, we are experiencing a huge boom in renewable energy technologies everywhere, including most IEA member states and OPEC countries to a lesser degree (bearing in mind that the headquarters of International Renewable Energy Agency is locating in Abu Dhabi, UAE, one of OPEC state). However, the development of renewable energy is highly dependent on the fossil fuel market, as investors eventually follow the basic economic principle in deciding where to bet their money on. Clearly an attempt to curtail oil price would bring less incentives for renewable energy development. This impact will only become more significant especially in Europe, after Germany swore to close down all its nuclear stations and Italians voted off future nuclear plans.
I have always considered the funky performance of OPEC, run by sandy princes, crazy dictators, and shitfaced theocrats, a primary driving force that is most likely to boost alternative energy R&D in the future. Their well-known public image and controversial cartel actions are mostly likely to deter others from bidding all the money on the oil. We see in Europe there is a surge of renewable energy (esp. wind and solar power) in the past decade, and that trend could be found in China as well. Meanwhile, even nuclear is once again given enough media attention thanks to both climate change propaganda and energy security concerns. For sure OPEC has played a major role in accelerating this trend and as I mentioned before, I am very much happy to see a major shift of our energy consumption patterns. Now that IEA releases its SPR trying to counter-attack OPEC’s actions, or shall I say IEA is attempting to preserve the importance of fossil fuel in the global energy politics. Personally this is not what I expect to see, I would be rather happy that global oil price be created artificially high by oil producing cartel and oil hoarding speculators so that we could seriously develop technologies such as fusion, hydrogen or even renewables. But IEA’s intervention just couldn’t let it go. But luckily, the energy market right now is much bigger and more complex from the time when SPR was created (1970s due to the oil embargo from Arab states). SPR release could not have a profound impact on the oil price nowadays. But I doubt if the oil consuming group is going to give up trying. After serving like a “think tank” for nearly 30 years, I am sure IEA would love to use this opportunity to reassert its image as a powerful and legitimate leader in the global energy governance, and SPR would consequentially be the Tomahawk that are going to be used more frequently, rather than the ICBM that you just create to scare others. While renewable energy is still weak in practice and nuclear bashed by environmentalist’s populist campaign, maybe clueless dudes like Obama feel it’s time to wipe off the dusts of IEA weapon in the energy war, but it’s very short-sighted and limited as long as most oil is still dug out in their desserts and gulf. I seriously hope one day I wake up and read the news that we could produce hydrogen or fusion in a massive scale, so that all these pointless war about energy would finally be put off (probably something new emerged, but at least you don’t need to feed those lazy ass in the desserts any more).