Oil price 'may hit $200' - developing countries face collapse
Oil prices have risen 25% in the last four months and by an incredible 400% from 2001. Goldman Sachs energy strategist Argun Murti now warns that all parameters point to the occurence of a 'super-spike' past $200 in six months to two years' time. He joins OPEC's very own chief, who recently uttered the same frightening words.Murti correctly predicted three years ago - when oil was about $55 a barrel - that it would pass $100, which it reached for the first time in January of this year.
Current oil prices - benchmark US light crude passing the $122 mark for the first time on Tuesday - are having destructive effects on all productive economic sectors of the oil importing least developed countries (LDCs). Of the 47 poorest countries in the world, 38 are net importers of oil, and 25 are fully dependent on imports.
Back when oil stood at a 'very low' $60, the United Nations already warned for the 'devastating' effects (previous post):
Recent oil price increases have had devastating effects on many of the world's poor countries, some of which now spend as much as six times as much on fuel as they do on health. Others spend twice the money on fuel as they do on poverty alleviation. And in still others, the foreign exchange drain from higher oil prices is five times the gain from recent debt relief.Each dollar increase in the price of oil directly affects LDCs' capacity to provide health care, education, and basic public and social services to their people. Agriculture, the mainstay of most of these economies, is badly hit and farmers can be thrown back into subsistence farming and hunger when oil hits a treshold that makes agricultural production and marketing difficult. All other productive sectors of LDC-economies depend on affordable fuels.
The African Development Bank, writing with a 'high' oil price of $70 per barrel in mind, added some other depressing micro- and macro-economic prospects for African economies:
- the risk of hyper-inflation, including steep increases in the price of food and basic staples; significant increases in real interest rates; the incapacity to introduce non-inflationary monetary policies
- declining domestic and foreign investment
- increasing unemployment, with the poor hit first and hardest
- decreased capacity to trade, as foreign currency pools dry up
- the destruction of the effect of debt relief efforts
- the erosion of the state budget, both at the revenue and the expenditure side; revenues decline as the profitability of businesses decreases
So what can poor countries do? Not much, because the problem is that there are no feasible alternatives to liquid fuel products, and that demand for these fuels is price inelastic. Highly developed countries can often consume a bit less or draw on strategic reserves, but the energy intensive countries of the poor South do not have this capacity. They can invest in biofuels - and most of these countries have a very large potential to produce them in a sustainable and highly competitive manner - but projects may take years to come online.
The recent food riots, already the result of record oil prices (and much less the result of biofuels) might just be a prelude to what's to come. Maybe the doom-scenarios sketched so often by 'Peak Oil' analysts will begin to play out after all. And they will hit the poorest countries first.
ethanol :: biodiesel :: biomass :: bioenergy :: biofuels :: energy :: sustainability :: peak oil :: collapse :: Africa :: Article continues
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Ideas and people come and go, debates shift and opportunities change. Over the past years Biopact has been instrumental in getting a simple message across: if biofuels are going to produced, it would be interesting to take the potential of the Global South into account. The message has added a perspective to a debate that has kept growing more complex and controversial. Biofuels for transport offer certain social and environmental advantages when they are produced in a smart way. But their (indirect) effects can just as well become so problematic that they outweigh these benefits.
Some plants have the capacity to grow well in nutrient poor soils without additional fertilizers. This is the result of a very efficient symbiosis between either nitrogen fixing bacteria that interact with the plant's roots, or between these roots and mycorrhizal fungi. These symbioses allow plants to strongly improve their uptake of nitrogen, phosphorus and water. Now a team of French and German scientists has
Friday, May 09, 2008
Brazil: sugarcane bioenergy bypasses hydroelectric power as primary energy source
Bioenergy has become Brazil's fastest growing renewable energy source and is already generating more power than all non-oil fossil fuel sources combined. As a whole, the country now generates 46.4% of its energy from renewables. This compares very favorably with the primary energy mix of OECD countries, where renewables account for a mere 5.2%.
Brazil is known for its large hydropower infrastructures, with more than 600 dams built on the country's many rivers. The largest dam, the Itaipu, has an installed capacity of 14GW and provides some 20% of Brazil's electricity needs. However, erratic rainfall patterns over the past few years, combined with the fact that almost all large rivers have been dammed, have limited the prospects for new large hydroelectric power projects.
In contrast, growing demand for efficient and competitive biofuels has resulted in an ambitious vision to focus the future of electricity generation in Brazil more on biomass. Sugarcane ethanol production yields a very large mass of waste, called bagasse, which is used to (co-)generate electricity. An initial step in the EPE's bio-electricity vision was the recent auction of 7.8GW of biopower: more than 118 sugarcane factories capable of generating excess green electricity ready to be fed into the national grid, registered to participate in the auction (previous post).
Overall, the Brazilian demand for all forms of energy grew 5.9% in 2007, totaling 239.4 million tonnes of oil equivalent (toe). The rate of growth for energy demand was greater than the growth in the Brazilian economy (5.4%).
Brazil's sustainable energy mix might hold the future for many African countries. Not less than 25 countries there have a very large land and agroecological resource base that allows for the production of highly efficient energy crops, like sugarcane or sorghum.
With oil and coal prices at record highs, and other, less-cost effective renewables like wind or solar not being capable of providing reliable baseloads, biomass may become the most important form of primary energy on the African continent.
References:
EPE: Cana-de-açúcar já é a segunda fonte primária de energia no Brasil [*.Pdf] - May 8, 2008
Biopact: Brazil's biomass electricity auction attracts 118 factories with 7.8GW capacity - February 22, 2008
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posted by Biopact team at 5:11 PM 0 comments links to this post