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Just how serious

10th August 1973, Page 17
10th August 1973
Page 17
Page 17, 10th August 1973 — Just how serious
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Which of the following most accurately describes the problem?

is the fuel crisis? by John Darker • Nearly 70 years ago, in CM dated March 23 1905, we published an article with the title: "Will supplies of petroleum spirit last?" In that year of solid-tyred, chaindriven lorries, the United States produced about 600,000 tons of petroleum spirit a year; the rapid increase in road transport envisaged was encouraging the exploitation of oilfields in Europe and Asia.

Today, the media is full of premonitory stories about the imminent fuel crisis in Europe. Lorry operators and motorists in America have been rationed for fuel, and there are entirely unconfirmed reports that the British Government is considering fuel rationing.

In a pamphlet published this week by the Conservative Political Centre, "The Energy Equation", Mr Peregrine Fellowes underlines many of the critical factors which demand urgent political decisions. The massive increase in the consumption of energy resources against the background of diminishing reserves of oil and gas poses a question mark for oil-using industries like transport which will not go away in the next decade.

The problem arises because the world — excluding the Communist countries — is dependent to the extent of about 55 per cent on oil and another 18 per cent on natural gas for its energy supplies, and these percentages are not expected to alter significantly at least until 1985, when the amount of both oil and gas consumed in that year will be twice as great as it is today.

"For if oil consumption goes on doubling every decade," he says, "as it has been doing, and if we do not find substitutes for conventional oil — and natural gas for that matter — then we shall have to discover new oilfields at a quite unprecedented rate. There is, of course, a lot more oil to be found, but to support consumption at its current rate of increase up to the end of the century we should need to discover and prove up new fields the size of the whole vast Middle East reserves every four years from now on; or, if another statistic is preferred, a new North Sea every month: and that is not going to happen."

Mr Fellowes suggests that this inescapable fact need not be disastrous or even particularly worrying, but it gives dimensions to the problem and shows clearly, given the long lead-time required for the development of new resources, the urgent necessity of taking those decisions that will facilitate a smooth takeover of energy production by other fuels and processes.

The thesis of the "Club of Rome" industrialists who advocate the slowing down of the rate of growth of all industrial economies, in order to save on fuel consumption and postpone the day of its exhaustion, is rejected by Mr Fellowes as unimaginative, almost certainly unacceptable to governments everywhere and, provided the right decisions are taken in time, unnecessary.

The author points out that petrol represents only about 15 per cent of total oil products used while fuel makes up about 40 per cent, gas oil (diesel, heating, etc) about 20 per cent; the remaining 25 per cent consists of naphtha, paraffin, bitumen, lubricating oils and petroleum gases.

Decisive influence

The decisive influence of governments in taxing or subsidizing different fuels is well known. Mr Fellowes reveals that governments of Middle East oil-producing countries take in taxes some fifteen times the actual cost of the crude oil produced, while the governments of consuming countries take on average twice the cost of the oil delivered and refined into products. In practice this amounts to about three times what the producing governments take and sixteen times the profit margins of the oil companies.

As the energy crisis develops, the use of government weapons — price control, taxation and subsidy — will be all important in influencing decisions to invest in the development of synthetic fuels from tarsands, shales and coal.

Mr Fellowes says there is no problem about either quantity or quality of the resources of raw material available for the manufacture of these fuels — "though there will be severe environmental disadvantages to overcome in the disposal, of vast quantities of sand, shale, or coal residues from which the usable hydrocarbons have been extracted". (Perhaps there will be abundant work for the tipping industry as a consequence?) Given a solution to the technical problem of winning fuel from shale at an acceptable price, supplies of oil and gas will be sufficient to meet estimates of demand throughout the next century. By then — if Mr Fellowes is right — the whole electricity generation will be based on nuclear (and possibly solar) power, together with the burning of hydrogen or methanol derived from virtually inexhaustible resources (hydrogen from the electrolysis of water, methanol from the combination of hydrogen and limestone).

With electric power, applied to road transport, in its infancy and current lines of research into improving battery and fuel cell systems not too promising, Mr Fellowes thinks some entirely new principle will have to be discovered and applied before hydrocarbons as a fuel for road transport can be replaced. This accounts at present for about 30 per cent of all oil fuels consumed in Western Europe — compared with 50 per cent in the United States, where natural gas and coal take up much of the industrial load.

But if replacement fuels (nuclear, hydrogen, etc) can be developed to take over the whole of power generation and most other static domestic and industrial uses, the petroleum fuels available for the internal combustion engine could be stretched far into the future. Refining techniques would need to be modified to produce more petrol and diesel oil and less fuel oil and lighter crudes (eg from the North Sea) would be preferred to the heavier crudes from the Middle East.

The main thrust of Mr Fellowes' argument, addressed to governments, is that growth in the world's economies — and particularly in those of the industrialized nations — is "the categorical imperative for our survival". If a no-growth or slowgrowth policy were followed, energy policy would not only fail to keep pace with increasing population but the strain on the economy of finding the capital resources for investment in the production of energy itself would be unacceptably great.

Mr Fellowes thinks the risk of expansion of the economy at, say, 5 per cent a year is justifiable though it might involve the conversion of the huge abundance of coal in the US and the Soviet Union into oil and gas. There is no evidence that either country would readily agree to this use of its coal reserve and he himself admits that if the West has not solved its energy problems by the time Middle East oil is nearing exhaustion, it may find its industrial economies largely dependent on the oil reserves of the Soviet Union, which are very great and comparatively intact.

How much extra will fuel oil derived from tarsands and shale cost us? The author believes synthetic oil may cost twice or possibly three times the current cost (in constant 1971 terms) during the late 1980's or early 1990s.

What this would mean for road transport is anyone's guess. It is difficult to escape the conclusion that at some time in the next decade fuel rationing for motorists may be forced on governments as a preferable alternative to across-the-board rationing, affecting transport operators as well.

Mr Fellowes was an adviser on Middle East affairs to Shell International and ended his Shell career as co-ordinator of trade relations. Mr Heath's "think tank", presided over by Lord Rothschild, will almost certainly be looking into the same dark crystal ball, in common with EEC ministers. On the wisdom of decisions made soon in Downing Street the growth and prosperity of road transport in future crucially depends.


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