Is energy still the fuel for global economic growth and prosperity? Could this civilization be termed as fossil fuel driven? Yes, most would concede. But if the World Energy Council is to be believed, it may not be so — anymore. Gerald Doucet, the secretary-general and the CEO of the London-based World Energy Council was in the Kingdom last week. Delivering his keynote presentation at the Riyadh headquarters of the International Energy Forum, before a select gathering of diplomats and energy fraternity, Doucet almost conceded that things have changed and energy is no more the driving force. And he argued with plain logic.
According to WEC the global GDP, for the last few decades, has been growing at an average rate of 1.5 percent per annum only. Now this is in contrast to some other estimates. IEA puts the global GDP growth over the last few decades averagely at 3 percent. WEC must indeed be having its own reasons for the estimate. And in sharp contrast to this dip in GDP growth rates, global energy consumption has grown significantly over the last four decades. No or little relation between the two, it seemed.
What does this mean? Apparently the fact that energy is not the reason, or to be on safe side the sole major cause, of driving the global GDP. This is significant! It turns the very phrase, that we live in a fossil fuel driven civilization, almost upside down. Doucet accepts. He conceded that the issue was a subject of fierce debate within the global energy fraternity. And if the above deductions are true, it has some major and significant implications for this energy rich region. Food for thought for the economic managers in Riyadh too.
In his almost 65 minutes presentation before the select audience, Doucet had other interesting observations too! In this era of globalization, while the world (leaders) appreciate the fact that the world has to be more open to each others products’ (and ideas), Doucet raised the question why it could be hazardous or strategically unacceptable, for any country or region, to be dependent on another country or region for its energy requirements? Why the word interdependence is bad, when viewed in terms of energy, Doucet asked. A million dollar question indeed, with apparently no plausible answer at our level.
This is simply geopolitics, Mr. Doucet. It could be very prudent and indeed essential to allow free flow of things - from Mcburgers to goods of Israeli origin into all parts of the world, including Saudi Arabia, under the WTO regimen, yet for some it also appears strategically important to carve out a way clear of Middle East for its energy needs Apparently that does come not under the purview of WTO and cannot be challenged at the WTO headquarters!
This becomes all the more important in view that the non-Middle Eastern oil would be peaking around 2010, declining by 1 million barrels per day then on. Reliance on oil from Middle East will naturally grow and not decline, he argued. So what the heck, he apparently posed.
And then setting aside, rather forcefully the very idea of peak oil theory, so vehemently being argued by Mat Simmons & Co, Doucet observed that in a world faced with “energy poverty,” more than 1.6 billion people today are “energy starved - with no access to energy.” But this problem has nothing to do with limited energy resources, rather it is an issue of investment in the sector. Indeed this investment has to be financed by someone. And in order to generate this sort of money to be invested in the sector, prices have to be right, so as to attract the investors. “Ultimately, it is the consumer who has to pay,” if one wants uninterrupted flow of energy.
Doucet also touched on another very interesting yet controversial subject. He stressed on establishing rules for energy trade. He argued that trade barriers have to go down, if one needs to ensure free and smooth flow of energy products from energy rich regions to energy hungry nations. Citing the example of Brazil, and with the Brazilian ambassador in Riyadh sitting only a few seats away, Doucet pronounced there was no justification in blocking the flow of competitive sugar based ethanol from Brazil into the US - apparently to protect the inefficient corn based ethanol producers in the US. Protectionism would hurt. This goes against the very basics of free trade, he kept arguing.
In this era of free trade, the Chinese CNOC should also be allowed to buy stakes in US energy companies, Mittal also has the right to buy Arcelor. Attempts to prevent market forces from playing their due role, would only aggravate things. Indeed its is against the very basics of capitalism, one could deduce here. Protectionism won’t help.
If the world intends to get out of the energy imbroglio, it needs to come to terms with the realities. If protectionism is bad in one sector, and for the under developed, it is ought to be bad in other sectors and in the industrialized world too. There cannot be a chose and pick policy, some one in the right quarters, those who claim to be the leaders of the free world, needs to get this message through - as very clearly outlined in the WEC’s “Energy Policy Scenarios to 2050.” The task is but daunting!