WASHINGTON – Running out of petroleum is not really the worry.
James Hamilton,professor of the Department of Economics in the University of California,San Diego,said at the American Enterprise Institute this week that high oil prices will lead to technology change,such as investment in conservation and more energy efficiency.
Hamilton said that there is no certain prediction for the future,but the price of oil will rise over time until significant alternatives make economic sense.
“There is no ideal energy source. They all have some problems,” Hamilton said.
Other specialists agreed there is no perfect energy source to replace oil and its price is likely to continue to rise.
Bill Prindle,deputy director of the American Council for an Energy-Efficient Economy,said that the biggest concern is to have a balance in energy demand. He said there are always limitations of materials and capital,even to produce energy from other sources.
The alternatives to petroleum depend on the market,he said.
In transportation,for example,Prindle mentioned bio-fuel,ethanol,soy-based diesel and diesel made from waste vegetable cooking oils.
“But none of these scenarios are sustainable unless we have a sustainable rate of growth in energy demand,” he said.
“I would not be at all surprised if oil consumption in 2006 is lower than in 2005,” Hamilton said. “But I think that the primary explanation for that would be the response of demand to the price increases that we've seen.”
As oil prices go up,consumption is expected to decline,Hamilton said.
Prindle said that the world is running out of cheap oil,but the key question is how high oil prices are going to have to rise to get a given level of demand reduction.
“I would say that the global oil resources are not about to run out. What we are running into though is a potential peaking in the ability of the world oil market to produce oil at ever-growing rates and affordable prices,” he said.
Prindle explained that high oil prices may have countervailing effects,such as reducing the consumption of other goods,instead of reducing oil use.
For example,people will still drive to the grocery stores,using gasoline,because they need to buy things. But once they get there,they may avoid buying extra products because they will still need to buy gas.
In recent years,developing countries in Asia have had the highest growth rates in fuel consumption,Hamilton said.
Hamilton said that China was responsible for one-third of the growth in the world's demand for oil last year. He said,however,the tendency will be for the rate of growth of oil consumption to decrease as China's economy improves.
World consumption of oil increased 3.4 percent,or 2.7 million barrels per day,in 2004,according to the U.S. Energy Information Administration. But the mature economies were responsible for just one-fourth of that growth.
China alone accounted for more than half of the 1.9 million barrel increase attributed to emerging economies,according to the agency.
Prindle said that in the U.S. there is the belief that the free market will take care of the situation,but he said it is necessary to have policies to stabilize the market forces.