Turning Oil Into Salt
By Cheng Zhi Wei
At the “In Dialogue with Youth” session at the Singapore International Energy Week 2012, Dr Gal Luft, Co-Director at the Institute for the Analysis of Global Security, gave an insightful talk titled “Turning Oil Into Salt” to dissect the importance of oil to our transport systems and touched on reasons why that is detrimental to our future energy security.
Salt as a Strategically Important Commodity
In the past, before the introduction of canning and refrigeration, curing foods was the only method of food preservation and the sole way of storing food. Salt was a critical component of the curing process and thus possessed strategic importance in the form of food security. It could be said to have a monopoly over food supply, dominating in a market with no competitors.
Due to its strategic importance, wars were fought over salt in a similar way to how there is much conflict and tension in the oil-rich nations. However, with the advent of canning and refrigeration, salt lost its monopoly on food preservation and with it, its strategic importance.
Oil as a Strategically Important Commodity
Just as salt had a virtual monopoly over food supply, oil has a virtual monopoly on our existing transport infrastructure, the main component being petrol-driven motor vehicles. While there are some alternatives in the form of electric-driven transit trains and gas-powered vehicles, an overwhelming majority of vehicles are powered by petrol.
Just as how initially there were no alternatives to curing, there are very few viable alternatives to petrol-driven cars. Besides the success of Brazil’s ethanol-biodiesel vehicles, gas or electric vehicles that are in use still make up a small number in most countries. Thus, oil remains critical for the functioning of our transport infrastructure.
This reliance on oil has several potential problems. Firstly, oil is a finite resource that has been projected to last for only another 40-60 years. These estimates vary as new technologies increase the size of accessible reserves but it is entirely plausible that oil will run out within the next generation or two.
Next, the majority of existing oil reserves are concentrated in a handful of countries, some of which are located in relatively unstable regions that are plagued with heightened tensions or even armed conflicts. This does not bode well for energy security as conflicts can easily affect the global supply of oil, leading to adverse price shocks and even economic recessions.
Lastly, over the past decade, oil prices have steadily increased as certain countries restrict production to boost oil revenues.
Dr Luft raised the concept of market competition and firmly believes that the strategic importance of oil can be removed by introducing more scope for fuel competition in our transport infrastructure. He proposed that electric vehicles would open the transport fuel market to competition from renewable energy sources like solar and wind in a similar way these renewables are competing in the electricity generation markets.
Alternatively, the proliferation of gas-driven vehicles would also represent a marked improvement over petrol-driven vehicles. This is because as compared to oil, gas can be found in more countries and thus more robust to supply shocks.
In conclusion, businesses and consumers alike should continue to innovate to reduce their dependence on oil so that they can be less susceptible to oil shocks.