Step on the Gas

As oil prices climb, will support for alternative fuels soar?

The OPEC ministers who agreed to raise oil production by 2 million barrels a day next month were particularly blunt about their reasons: Global prices for crude have simply climbed too high. But market analysts don’t expect the increased output to cut into gasoline prices anytime soon, and the OPEC decision has done nothing to reassure investors shaken by last weekend’s attacks on the Saudi oil industry. That’s bad news for American SUV drivers, but it would seem to be good news for advocates of alternative fuels. But are concerns about terrorism and unease over high prices really enough to boost the case for renwables?

That question is on the mind of nearly every attendee at this week’s
Renewables 2004 conference
in Germany —
appropriately, the world’s leading producer of wind energy. The basic statistics are less than encouraging. In
2003, solar, wind, and other renewables
accounted for a miniscule 5 percent of energy generated worldwide, compared to 38 percent for oil and 50 percent for coal and gas. But as Germany’s
development minister Heidemarie Wieczorek-Zeul told told the conference crowd:

“Every time oil prices rise, people talk about how we have
to become less dependent on oil, but the practical
conclusions are never drawn. Anyone who thinks we should not
be dependent on an unstable region like the Middle East
should ensure energy sources are diversified.”

Oil production is expected to peak in the next few
decades, Middle East has grown only more unstable since the
war in Iraq, and the last of the “new” oil will come from
politically turbulent areas like the Caspian. Add in the
mounting concerns over carbon dioxide emissions from our
fossil fuels-driven economy causing global
warming, and the obituaries for the oil age begin to make

Europe has been far ahead of the United States in
severing its reliance on oil by cutting demand and funding
the alternatives. As Paul Roberts, the author of The End
of Oil
points out, the United States is home to 5
percent of the world’s population, but it accounts for 25
percent of the world’s energy consumption, with American
lifestyles being “twice as energy-intensive as that in
Europe and Japan.”

Gasoline is heavily taxed in Europe, governments
generously subsidize alternatives such as solar, and a
strong euro has helped cushion the rise in oil prices. Before the European Union’s expansion this May, its members
have set an ambitious target of doubling their reliance on
renewable sources from 6 to 12 percent of all energy use by 2010. The United States’ reliance on the alternatives hovers around the European average, though it is behind
countries such as Germany, where wind power alone accounts
for 6 percent of the country’s energy needs. In contrast,
the Bush administration’s energy policy is hinged on shoring
up oil supplies by assuring access to oil fields in
U.S.-friendly authoritarian regimes in Central Asia, new
drilling in Alaska, and assumptions of unprecedented
access to the plentiful Iraqi market, with very little
thought given to the alternatives.

The current hike in oil prices is in part attributed to
the unprecedented demand from China, which is the world’s
biggest consumer of oil after the United States. Soaring
energy consumption in developing countries, particularly in
China and India, are propelling economic growth there, but
are becoming increasingly difficult to sustain. Developing
countries are in a weak position to compete with the United
States for the last of the “new” oil and the environmentalists
are concerned about their over-reliance on coal — the most
polluting of the fossil fuels. The eradication of
widespread poverty in those countries, meanwhile, can only
be achieved with the use of more, not less energy, and the
attempts to keep up with the demand are leading to what many
fear are unwise energy choices. Last month, for example,
China announced that it will build 30 nuclear plants by 2020.

Organizers of Renewables 2004 hope to convince developing
as well as industrialized countries that in the long-term,
wind and solar are more cost-effective than oil or nuclear.
As far as the bottom line is concerned, generating solar
power is still less profitable than drilling for oil, but
the gap is much narrower than it was a few decades ago
thanks to technological improvements. A recent New York Times article argued that the falling
price of renewables — not the recent turmoil in the Middle
East — is really what’s driving recent increase in the
demand for the alternatives. As the Times article
points out:

Electricity-generating solar panels, which were invented 50
years ago and cost $100 a watt in 1976 now sell for less
than $3 a watt, and are expected to continue declining 5
percent annually in cost even if there are no technology

For now, solar energy technology is
approximately 10 times as expensive as traditional fossil
fuel systems for generating large amounts of electricity,
according to a recent estimate by the Sandia National
Laboratories. But solar is already a cheaper alternative for
powering sites that are long distances from the power grid.

Gas-electric hybrids account for only 0.26 percent of all cars and trucks sold in the United
States, but sales are up 37 percent this year. While there
is much excitement about hydrogen-powered cars, they still
face a number of hurdles, including the lack of a
cost-effective way to produce hydrogen and the absence of an
existing fuel infrastructure. Manufacturers will begin
testing a small number of hydrogen cars in the United States
next year.

The presumptive Democratic presidential nominee Senator
John Kerry has blamed the Bush administration for high oil
prices and has insisted that greater pressure must be
exerted on the Saudis to release more oil on the market. As Kerry told his supporters:

“I would have begun the process of leveraging and jawboning
OPEC months ago, ages ago. I would long ago have moved the
U.S. into a less energy-dependent situation on the Middle
East. I would be pushing alternative and renewable fuels
here in this country. I’d be pushing bio-diesel … there
are all sorts of alternatives to lower our overall costs.
Diverting some of the oil we’re putting in the Strategic
Petroleum Reserve would help. Changing some of our practices
of consumption would help. Changing our additives rules and
regulations. We have different additive standards in so many
different places that it raises the cost… The simple fact is,
Bush has done none of them. None! Zero!”

With high oil prices making headlines everyday, the topic
may well become, as many have suggested, the “sleeper issue”
of this election season. Kerry’s outrage over the $2 per
gallon prices at the pump is music to the ears of
SUV-loving voters, but he has yet to present a comprehensive
energy policy of his own. And while Kerry and mainstream pundits are appropriately worried about the global reliance on Saudi oil, few are looking beyond our national petroleum addiction for solutions. The editorial writers at The Washington Post are a welcome exception. Asserting that “long-term reliance on the stability of an autocratic monarchy is a frightening prospect,” the Post outlines a novel solution: reduced federal subsidies for oil and a gas tax increase. Both steps would be welcome, particularly since they would help produce a level playing field for fuels, a kind of free market approach which contributor Harvey Wasserman argued back in January would result in a far greener approach to energy generation.