|
|
 |
|
| World Marketplace |
Fuel Fossils
Matthew Simmons with additional reporting by Daniel DelRe
08/01/2005
|
As
an alternative fuel, natural gas holds some promise, but also offers significant
obstacles. Transporting gas to the United States from abroad becomes
economically feasible only when the gas is liquefied to squeeze a greater amount
of energy into shipping tanks. This process, however, involves the additional
steps of liquefying the gas and then “regasifying” it at its destination, making
the supply chain for natural gas more complex and expensive than that of oil.
Fuel for Thought
As the peak oil phenomenon unfolds, it may change the way
we currently arrange global supply chains. Today, too many components of goods
are manufactured in various plants around the world, then flown or shipped to
assembly plants close to their consumer base. As 70 percent of global oil use
accounts for transportation of people and goods, assembling products and
creating jobs closer to consumer markets can reduce oil consumption.
Transporting goods by rail would also require only 20 percent of the oil used by
shipping fleets composed of trucks and planes.
Consequently, the immediate
economic impact of peak oil will weigh most heavily on the poorer countries of
the world. As more and more oil fields peak and decline, fuel prices will
begin a permanent, irreversible rise. Global corporations will reorder their
supply chains to minimize shipping costs. Low-wage countries will lose jobs as
manufacturing centers are relocated closer to wealthy consumer markets. This
will cause unemployment in areas of Asia and Latin America.
In parallel,
cost-of-living increases associated with rising energy costs will have an
outsized impact on poorer nations as unemployment levels increase. In
combination, these changes will spur greater migration to wealthier countries in
the West and parts of Asia, resulting in political and economic stress.
Businesses in these countries will also focus more on domestic markets,
potentially leading to a breakdown of today’s global network of investors,
producers and consumers.
Preventing events like these will require heroic
conservation efforts, along with unprecedented development of smaller fields,
alternative fuels and improved methods of transportation. As of yet, no world
leader has proposed a strategic plan to guide the world along this path or to
dispel the deeply embedded mentality that oil is plentiful and will be for years
to come.
Matthew Simmons is CEO of Simmons and Co., a Houston-based investment bank
serving the energy industry, and author of Twilight in the Desert: The Coming
Saudi Oil Shock and the World Economy.
|
|
|
|
|
|
|
