Changing the paradigm of oil
June 21, 2008
(No Ratings Yet)
Loading ...I’m writing this blog entry a few hours after the European Council and few hours before taking a plane to
Saudi Arabia for a meeting of oil producing and consuming countries. Both summits have in common the subject of discussion: high oil prices. This is no surprise. The high prices of oil and food are dominating the global agenda and are a cause of concern not only for fishermen or truck drivers, but also for everybody else, including oil producing countries.
For Europe the priority now is helping the most vulnerable consumers. The Council conclusions state very clearly that measures can be considered to alleviate the impact of higher oil and gas prices on the poorer sections of the population. Nevertheless, Heads of State and Government make clear that these measures “should remain short term and targeted”. Basically what the Heads of State and Government agreed, is that this new oil shock cannot be addressed in the same way as the previous ones. The fundamentals of the market have dramatically changed. High demand is fuelled by strong economic growth in new parts of the world like China or India while new production capacity fails to follow the path of demand.
In the short term we will have to address market conditions, which are currently submitted to a very high tension. In other words, oil producing countries should increase both production and investment in new production capacity, and make it easier for global companies to make investments. Consuming countries should push strongly on energy efficiency, rebuild stocks and combat market speculation. With determined action on these fronts we can bring the barrel back to a reasonable price.
This is precisely what large producing and consuming countries, as well as the IEA, major international oil companies and major banks will discuss in Jeddah, Saudi Arabia, this Sunday. I think it is important that
Saudi Arabia, the main oil producer country of the world, has taken the initiative. In my opinion, this shows that high oil prices are good for noone, not even for oil producers, and that we all have interest in reducing tension in the markets.
But this cannot be the end of the story. Shortage of oil is not any more a temporal problem but a structural one. We should change the way we produce and consume energy for ever. We have to move away from oil. And this is not new. In September 2005 I presented a five-point plan, to combat high oil prices, at the time around $65 per barrel. The plan was a complete change of paradigm in the way we are using energy. Since then there have been a series of new proposals to begin to reply to this challenge.
These measures include:
- the draft directive guaranteeing 20% renewables in our final energy consumption by 2020 and the increased consumption of sustainable energy in the transport sector which include the commitment of the European Council to ensure that 10% of EU transport is powered by renewable fuel by 2020 into practice. It should be noted that this 10% can be covered by biofuels, or electricity from renewable sources.
- the new rules to expand and strengthen the EU Emissions Trading System, ensuring that we meet our target of a 20% greenhouse gas reduction by 2020;
- the proposal for reducing CO2 in cars and the fuel quality Directive that will oblige oil suppliers to progressively reduce the CO2 in the products that they sell, and
- last but not least, the Energy Efficiency Action Plan, covering all economic sectors, at all levels, from the International Partnership for Energy Efficiency Cooperation, to the Covenant of Mayors at the local level, to specific measures like labelling of consumer goods or requirements for the energy efficiency of buildings. Practically all of these measures were already cost effective at $60 per barrel of oil. At $130, they are just excellent business!
I think this is the right track to follow. The European Council, in its conclusions, says clearly that “these developments underscore the need to rapidly adopt the climate change and energy package, many elements of which can help alleviate the situation”. As a Korean professor said once, a pessimist is someone who sees problems in the opportunities; an optimist is someone that sees opportunities in problems. Oil prices are a problem that has to be urgently addressed, but could be also an opportunity to move towards a low carbon, secure and intelligent energy use. I think we have good reasons to feel optimistic.
Print This Post
Email This Post
RSS comments feed on this entry
June 21st, 2008 at 5:43 pm
S.O.S Live Earth with The Cooperation in G8 and EU,Europe…Planet: Stable and Efficiency Energy , as well as the Clean Global Environment.Future of economies and citizens- The Year and Problem ! Goals - Policy EU (Global) in 2030- Obligatory :energy savings !-Dependence on imported oil and gas could rise to 70% (World energy demand and CO2 emissions is expected to rise by some 60%).
Oil( and gas prices) are rising at $139/barrel and….250?(position Gazprom).The Effect:with electricity prices to the final consumer- households, and on several economic sectors.!
YES for -The PLAN for the Promoting of Energy EFFICIENCY!The directions on action :
1.For Europe needs to deal with the challenges of climate change in a manner compatible with its Lisbon objectives and a clear goal to prioritise energy efficiency-EE, with a goal of saving 20% of the energy that the EU would otherwise use by 2020 agreeing a series of concrete measures to meet this objective, including and : A Europe-wide “white certificates” trading system! - GREEN PAPER A European Strategy .
2. Implantation of the Performant and Clean technologies for energy generation and use sector Energetics total Efficiency and in costs to makes certain for each ,therefore,and total -producer (slack link point of view ),conveyer and final consumer.
3.Stimulate Finances through(estimates 16 trillion Euros): investment projects concerning production and distribution ; Joint Implementation of the Kyoto Protocol can be make the retechnologisation; the introduction to the Long Term Agreement, as a form of partner ship between Government and the various professional associations(chemistry, oil chemistry, metallurgy, large energy consumers) for the reduction of power consumption in the respective fields;the attraction of the power services companies or investors, by a proper legislation and a clear policy of fiscal and financial incentives.
4.Nuclear power with- safety and security energy - load at competitive prices- low carbon source-independence energy! With 152 reactors spread over the EU 27, nuclear power contributes 30% of Europe’s electricity today.
Yes for ACTIONS in EU:(20 Energy Efficiency +20 Reduction target of Greenhouse gas emissions +20 Increasing the level of Renewable Energy +10 Sustainable biofuels)%+2°C Limiting Climate Change =72 -work for Office of the Energy Observatory and European Charter on the Rights of Energy Consumers.
S.O.S Live Earth and with Counsellor Naidin :www.eficientaenerg.ro/www.SOSTerra.go.ro and http://www.sustenergy.org( Promotion of Energy Intelligent Building PLAN-Romania –Naidin)!
June 22nd, 2008 at 11:17 pm
Dear Mr Piebalgs,
Thank you for your sustainable propositions to solve the oil crisis.
I was a little desperate to hear my French President Nicolas Sarkosy proposing to limit VAT on oil. This is not a long term solution. But, if Nicolas Sarkosy wants really to reduce taxes on oil, why he doesn’t reduce TIPP ? Many French people don’t understand his choice. TIPP (Taxe Intérieure sur les Produits Pétroliers) is the most heavy taxes that all french consumers pay on the oil (TIPP = between 40% and 50% of oil total price / VAT = 19,6% of oil total price). While setting up a threshold on VAT needs an european agreement, to reduce TIPP only a national decision is necessary. It is not a good solution, but it is more an easy one.
I was so desperate to hear the French Prime Minister François Fillon saying that to answer to the oil crisis, the French government would like to plan the building of a second EPR. All the people want more renewable energies, but in France they will get nuclear reactors… Moreover, the beginning of the first EPR builded in Flamanville has got problems. It has been stopped. Now it has been restarted but some associations suspect that the problems are not really solved. Why this anti-economic and anti-ecological option ?
So, after these dark French perspectives, I was very happy to read your post and to discover your clever and sustainable solutions to the oil crisis.
Cordiales salutations.
June 23rd, 2008 at 9:49 am
Dear Andris,
I am wondering about what exactly does a “reasonable” price mean?
Unfortunately for all of us, I think that what is happening, which is the situation you have well described, is precisely reasonable today, and so it will be in the future: high oil prices driven by a growing world demand + a stagnant supply, which is not a strange fact at all if we consider that the world stock of oil is declining and that will be over in a few decades… I fail to see anything “unreasobable” in there.
And when we talk about globalisation of “the model”, another idea crosses my mind: why does the media and everyone talk about high demand “fuelled by the high growth of India or China”? (It is not a personal remark) I think this view is deeply biased.
The most important consumer of oil in the world, with around four times less people, is still the United States, which have had several decades of wealth, technological capabilities and political opportunities to review the features of their economic development. The same applies for us in Europe and other industrialised countries which have lived in a high oil consuming way since WW II, and still consume much more oil per capita than India or China.
So, why blame on the chinese portion of the cake? Or the indian? Was it not the ideal for western countries, the World Bank, the IMF, the overwhelming majority of western economists, usw, to see poorer asian, african, latin-caribean countries join the path of “development”? Why is it that now, they are pointed at like that?
Is maybe oil consumption meant to be something “natural” for white people, but not for other races?
We should understand for once that the traditionnal western model of economic growth (just as the ancient soviet high natural ressource consuming one) will be over soon, and particularly over if it is meant to be globalised as it is being today.
My best regards and have a good week.
June 23rd, 2008 at 1:55 pm
Dear Pielbgas,
Few comment on oil price and why we stand here:
1-OPEC is behaving like a cartel, presence of a producer cartel will never help proper price formation, why we did not take any position against cartels?
2-Understand the difference from spot price on a financial market and real price of produced oil with contract like take-or-pay…consumers are induced to think that this is the price that oil is really paid …not really true, why not investigate properly on such side?
3-Relationship between oil price and volume of reserves, the volume of reserves is the quantity of known volume that can be economical recoverable. Therefore if price is up, reserves are up and I wonder if we can discover that is much more easy to inflate the asset of an oil company with financial futures than with more expenses in explorations;
4-How much is the price of oil linket to other issues like the weakness of USD that reduce the incomes of oil producer countries, and therefore to keep same revenue they are tempted to increase prices ?
Solution, I think there is not a simple single solution but keep pursuing the current EU energy policy of diversification and increase of RES energy.
Best regards
MM
June 24th, 2008 at 2:17 am
Which of the points been finished or implemented since the five-point plan was unveiled?
Who will move the “new” proposals from discussion to implementation, and in what timeframe?
June 24th, 2008 at 1:33 pm
Andris,
I hope you had a good time in KSR, but over the last three days I have seen oil prices rise every day so the market is obviously not too impressed, what do you think Over the last year natural gas prices have also doubled in all major markets. If you want to know the future prices take a 30 second look from Down Under at;
http://www.youtube.com/watch?v=CZlT4w2tZmg
Is this what it takes to get any action? If so then please let us know and we can get busy making videos rather than suggestions on this forum.
Without being patronising tell us; what you can do; what you are willing to do; which of our suggestions you are willing to adopt…
June 25th, 2008 at 10:37 am
Dear Commissioner Piebalgs,
I understand your short-term concerns about oil prices. However, in the long term, oil is a non-renewable resource, that we MUST use with greatest efficiency and parsimony. This requires, as you stated righteously, a major transformation of the very structure of our society and economic model, therefore major investments (in infrastructure, adaptation, etc.)
In order to finance this effort, and in order to send the right signal to consumers, that the time of cheap energy is over, an efficient measure would be to INCREASE TAXES on oil and fossil fuels (rather than reducing or capping them). This tax increase should be slow, but steady and permanent: this is the only way for consumers and industry to adapt progressively. If it is not done, and if people are left with the illusion that energy is cheap, the adaptation will be brutal, along market oscillations, and this is the most “un-social” way of dealing with the issue.
A full set of arguments in favour of this policy is developed (in French) in Jancovici JM, Grandjean A “Le Plein s’il vous plait” Seuil (Paris) 2006
Very best regards.
June 25th, 2008 at 11:56 am
TEOTWAWKI School Report
Pupil: Andris Piebalgs
Subject: Energy
Marks: 7 / 10
Comment:
Andris has been doing good work at times, but it is not consistent. However, he is making progress in this area. He is having some difficulty with the topic of oil depletion, but if he continues to work hard he will see improvement soon. He would benefit from reading online contributions at such websites as ‘The Oil Drum’, though we are aware that he has a busy schedule. Unfortunately, he misuses much of his work time daydreaming about such bullshit as the potential of biofuels and the utility of ‘discussions’ with oil producing countries. He suffers from overoptimistic personality disorder but a good dose of reality may eventually have a corrective impact.
Recommending reading for persons with overoptimistic personality disorder:
Euan Mearns: ‘A state of emergency’
http://europe.theoildrum.com/node/4188
June 25th, 2008 at 2:50 pm
PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL PEAK OIL
Dear Andris,
Newspapers report that the EU reassured OPEC that it will NOT import LESS oil in future.
Without wanting to bore your audience with top notch calculation on expected future economic growth vs. increased energy efficiency and blablabla:
How does that correlate with your policies??? If your policies would be successful, shouldn’t our oil imports go DOWN????
It sure makes alternative energies, efficiency and sustainability sound like cheap political slogans…
June 27th, 2008 at 7:05 am
Dear Mr Piebalgs,
I see you have a basically correct outlook on this issue. This crisis is most likely not temporary indeed. Oil production will likely not increase for the next few years, and will eventually decline. Demand however is increasing and will only decrease if there is a major global recession and/or we move to alternatives.
EU governments must not act like this is temporary, and must resist impulses to blame speculators, OPEC and oil companies. Govs should not lower fuel taxes or give subsidies to cover the rising costs. That will only hide the problem under the rug, until the one day the rug wont be big enough.
Right now in my country (Portugal) I see fishermen striking, truckers striking, farmers and taxi drivers threatening to follow. I understand their difficulties, but they must be told to pass theirs costs down to their clients and deal with it the best they can. They must understand that the cheap fuel era is over, and they must adapt. If new subsidies are given it should be to help them adapt, not help them continue business as usual!
Our economies are feeling the pain from oil prices, but it would be very irresponsible for govs to try to alleviate that pain. Our economies absolutely NEED that pain to drive it to adapt! Govs just need to provide leadership and help the efforts towards adaptation.
June 30th, 2008 at 10:33 pm
Dear Commissioner:
Hearings in the USA Senate ( June,3,2008) and USA House ( June, 23,2008) made very clear that the “5 % deposit” to buy positions on oil and gas has led to massive speculations , most experts and Legislators insisted on demanding 50 to 60 % cash deposits on contracts,and to proof that they will take delivery of the commodity and not just trading positions…. but will they do anything like clamping down on the incompetence and corruption in the CFTC ( Commodity Futures Trading Commission ) , or the SEC ? , or dark markets ? or “over-the-counter-markets” ? or enact a Law ? never !
in these Hearings it was made clear that some of the biggest Gas,Heating Oil, Crude Oil,etc.,contract holders are Morgan Stanley and Goldman Sachs, among others,they trade today based on the spike yesterday, so it never will end, it’s a never ending rush of profits, everyday higher to sell yesterday’s position, a spiral…
it’s a speculators market : with spikes of 11 dollars in one single day last week when the israeli General Mofaz talked about bombing Iran and cutting oil flow ,traders went crazy buying at higher and higher prices and speculators made a fortune , so when war gossip and rumours make billions in one day, fools pay the price… fools that still use oil that is…
the greed does not stop there, many here in the USA are outraged that the investor Mittal just joined the Board of Goldman Sachs, where another Board member is the chairman of the Federal Reserve Board of New York Stephen Friedman, this is a huge conflict of interest, in Europa would be indictment material, a Central Bank member with official-rates inside- information sitting on the Board of a private bank, absurd , but so far, nothing…business as usual……so we need to get out of oil right now,with solar,wind,hydrogen, ethanol-biofuels, geothermal, fusion and with a passion…
July 2nd, 2008 at 12:30 pm
Dear Commissionner,
Indeed, high oil price is unsurpringly a major concern nowadays. This is no surprise. But do you think developping nuclear energy power in the EU could also be an alternative to reduce energy prices?
In any case, I invit you to visit our Blog on energy issues in the EU and especially to give us your point of view on this article of MEP Frassoni: “Nuclear’s potential to curb climate change is a myth” (http://speakup-energy.blogactiv.eu/2008/06/30/mep-frassoni-nuclears-potential-to-curb-climate-change-is-a-myth/).
I also invit you to take a close look a the conclusions of our conference organise in partnership with Enel: “The New Nuclear Wave: Perspectives for the 21st Century”, which will be published in the following days.
For more information, please click on the following link: http://www.europeanmovement.org/emailing/invitations/invitation.html
Best,
July 2nd, 2008 at 7:49 pm
Andris, I thought you were going to have a weekly blog?
Just in case you missed the news it can be summmed up as another week another record high price, nothing much being done by politicians.
Aren’t you even going to give us a report on what happened in KSA? Or was it a waste of time going?
July 3rd, 2008 at 2:15 pm
Thank you for outlining the Commissioners viewpoints on required action. Let this be a time of political courage. Across continents, debates are running high and low about high fuel prices, helping consumers and cutting taxes and tariffs on gasoline fuel is a suggestion. What a shortterm ‘quick fix’ that would be. Like peeing in your pants to stay warm (excuse the lack of better analogy). The past decade has been about introducing competition in energy markets and simultaneously trying to advance clean energy technologies and renewable energy sources for the sake of the environment, the climate, and also for the sake of the economy to harvest the economic, employment, and industrial benefits of emerging clean energy technologies. Being up against mature technology and fossil fuel-based infrastructures, the integration of emerging clean energy technologies has been and is a path with hurdles. Although a lot may be said about geopolitics and oilprices; it may be said that the market for fossil fuel energy may finally be working and showing signs of scarcity which in turn puts pressure on price. Politician that act surprised and with outrage over this should seriosly have done their homework a little better. There have been writings about oil peaks, energy security and growing energy dependencies since previous oilcrises.
So let prices rise and let this be a point in time where new ways and a transition to new technology technology structures and fuels are pursued with greater pace, commitment and funding.
FINALLY!!!
July 3rd, 2008 at 9:44 pm
Dear Mister Piebalgs,
The prices of gasoline and natural gas are now rising very fast. This changes the whole financial situation of the renewable energies.
If oil goes to 200 dollar a barrel, the price of natural gas will be such that it can not compete anymore with CSP from the deserts, including transportation to Europe. Those CSP plants can be much faster build than nuclear plants (current production is about 6 nuclear plants a year, that is 4 western type and 2 Russian type, this is far insufficient).
So, maybe within a year those CSP plants are competitive with natural gas. And still, the European effort is almost nihil. So, we are lagging behind, with this technology.
If there are 2 shops. 1 with a waiting list of 10 years and another shop with enough supply and no waiting list, but a little bit more expensive. Which one do you take?
Regards,
Lucas Kruijswijk
July 17th, 2008 at 12:19 pm
Dear EU Commissioner
You said the age of affordable energy is over.
I fortunately refute what you say. It is possible, abundantly. Not only can I prove you wrong, but if you are up to it I can provide you with an energy solution…perhaps when you grow weary of flying and flying to waste your time allover.
Re: Cyclic Regeneration of Clean Energy,daily and guaranteed into National Grids.
Concept: The generation of unlimited,daily, clean electricity into the national power grid, in volumes that, with minimal/full implementation, will outstrip the combined output of wind and solar energy combined.
Strangely enough, numerous communications to your ‘team’, have yielded ZERO response…which makes me wonder if you are really serious about the global power crisis,or just enjoy flying around from meeting to meeting, to discuss the same issues over and over with no solid solutions.
I challenge the EU,UN, any other countries and every scientist on the planet.
Are we waiting for the economies to collapse fully..or for rioting to reach unmanageable proportions first? I think the people are being crushed,and world leaders fly around,and wave..and attend summit after summit,and sign declarations,and make pledges that none can keep..but really have ZERO SOLUTION to the escalating problem.We hear the expansive stories about wind and solar..but we all know this has NO CHANCE of providing enough power globally. The graphics are elegant,and everything looks very techno..but the outputs are limited by various conditions and drawbacks.
The concept carries a cost,and 7 preconditions.
When someone out there is serious about producing electricity,lowering global emissions,saving the rainforests,protecting the environment,and changing the direction of technology in the world, then perhaps contct me.
Forgive me if I sound a bit intense..receiving constant ‘autoresponders’is irritating.