A few cents more and a liter of super unleaded gasoline will cost German drivers 1.80 (around $9 a gallon). That means that someone driving a BMW 3 Series will have to pay over 110 ($150) to fill up the tank, with its 63 liter (17 gallon) capacity.
But Norbert Reithofer, the CEO of BMW, seems surprisingly relaxed for an executive whose company's products depend on gasoline and diesel. "One could see this as a threat," Reithofer says. But the auto executive actually views the rising price of fuel as "an opportunity." He is convinced that his company will in fact "derive a benefit from this."
The Munich-based automaker has invested billions of euros in fuel-saving technologies, such as efficient engines, brake energy recovery and ultra-lightweight carbon fiber car bodies. BMW is now considered a leader in the field, and the company's record sales in 2011 suggest that this is something its customers are willing to pay for. And that, Reithofer believes, is why the company will ultimately benefit from high prices at the pump.
Airbus CEO Tom Enders uses a similar argument. He ought to be upset about high kerosene prices. They have sharply affected his customers, the airlines, whose profits are shrinking and who are investing less money in buying new planes as a result. Nevertheless, Airbus has never had as many orders on its books as it does today.
Last year, Airbus received well over 1,000 orders for its A320 neo model, with scheduled delivery starting in 2015. Thanks to new engines and special wings, the plane uses about 15 percent less fuel, making it significantly more fuel-efficient than competitor Boeing's comparable models. This is a critical selling argument in times of high kerosene prices, says Enders. "To a certain extent, we do benefit from the high price of oil," he adds.
Addicted to Oil
This is certainly one way of looking at things. Drivers are upset about the record high prices at the pump. But on the positive side, they also force companies to change the way they are using the increasingly precious commodity, so that they consume it more consciously and not as wastefully. And that change is necessary.
The world is addicted to a material that is being used up from day to day and from hour to hour, a material that is also much too valuable to be burned. The prosperity of the human race is based on limited resources. Most people know this, and yet they refuse to accept the necessary consequence: reducing their use of fossil fuels.
The record high prices for gasoline are probably the most effective incentive for us to finally kick the oil habit and search for alternatives. And they are fueling the modernization of the economy in the process.
The withdrawal will undoubtedly be tough. The economy will be affected when it is deprived of its lubricant. But consumers and business owners have no choice, and the longer they delay, the more painful the transition will be.
No Plan B
When gas prices go down, people drive more and buy more powerful cars, which in turn leads to higher fuel consumption. But when that happens, the world heads toward the inevitable end of the oil era even more quickly than it already is. At some point, it will consume the last drop of oil and end up without a plan B.
But if gasoline becomes noticeably more expensive, phasing out fossil fuels could be relatively pain-free, as paradoxical as it sounds, because it will prolong the transition into the post-oil era. The world would be buying time for an energy revolution, gaining a reprieve in which scientists could develop more efficient batteries for electric vehicles, for example, or grow energy plants to produce biofuel in a way that takes up as little agricultural land as possible. Higher fuel prices would enable the world to stave off the fossil-fuel finale.
If the United States, France, Great Britain and Japan do in fact release their oil reserves, the stockpiles of fuel that are built up to deal with crises like disruptions in supply, wars or natural disasters -- as some politicians have been calling for -- it will probably bring down prices at first, but it will also send precisely the wrong message.
By now, it isn't just environmentalists, but also liberal economists who advocate a strategy of increasing fuel prices. Oil is apparently still far too cheap, or else consumers wouldn't be as wasteful with it, says Thomas Straubhaar, president of the Hamburg Institute of International Economics. "The whip of scarcity is the most effective tool for driving innovation."
This brutal mechanism could be seen for the first time after the 1973/74 oil crisis. At the time, the oil producing industry searched for new sources to reduce dependency on oil from the Middle East. This led to discoveries of deposits under the ocean floor in the North Sea and the Gulf of Mexico.
Approaching the Limits
But now the Earth's supply of oil is approaching its limits. The development of new fields is becoming more and more complicated, costly and dangerous, as the accident at the Elgin natural gas platform in the North Sea demonstrated last week. Even more important is the fact that not even all of the oil in the Arctic and the deep sea will be enough to quench the immense thirst for energy developing in East Asia.
China already consumes 9 million barrels of oil a day, or almost twice as much as it did 10 years ago. It is estimated that by 2020 the number of new cars sold in China will be 70 percent higher than today, and all those additional cars will lead to more traffic congestion. A huge new generation of energy users is emerging in the People's Republic and in India, and they are emulating the Western model of consumption, complete with air-conditioned homes and a car in the garage. The two countries, both with populations of more than a billion people, have a lot of catching up to do.
If every person on Earth used as much energy as the average person in the United States, today's known oil reserves would be exhausted within nine years.
Worldwide energy use will almost double by 2050, predicts the Organization for Economic Cooperation and Development (OECD). The most problematic aspect of this is that, according to scientists, the share of energy consumption attributable to oil, gas and coal will not decrease. Today, four-fifths of the energy we use comes from fossil sources. "The erosion of our natural environmental capital will increase the risk of irreversible changes that could jeopardize two centuries of rising living standards," warns the OECD in its report.
The message behind this warning is that commodity prices must send a clear signal, namely that society can no longer afford a prosperity that is based on the squandering of natural resources. But what are the consequences for consumers? How much more expensive do fuels have to get so that people change their behavior?
About oil and peak oil, please do not hesitate to sign (and forward) a call to French presidential candidates "mobilizing society in the face of peak oil" originally published March 22nd in lemonde.fr. Signed by : [...] more...
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