Electricity to replace oil | ‘The 21st century will see oil’s influence wane, argues The Economist (‘Electric dreams,’ The Economist 17th March 2018, p.13-4 (abridged).
‘Cheap natural gas, renewable energy, electric vehicles and co-ordinated efforts to tackle global warming together mean that the power source of choice will be electricity. The electricity era will diminish the clout of the oil trade, put energy production into local hands, make power more accessible to the poor. It will also make the world cleaner and safer.
Oil and electricity are a study in contrasts. Oil is a wonder fuel, packed with more energy by weight than coal and by volume than natural gas (both still the main sources of electricity). It is easy to ship, store and turn into myriad refined products, from petrol to plastics to pharmaceuticals. But it is found only in specific places favoured by geology. Its production is concentrated in a few hands, and its oligopolistic suppliers—from the Seven Sisters to OPEC and Russia—have consistently attempted to drip-feed it on to the market to keep prices high. Concentration and cartelisation make oil prone to crises and the governments of oil-rich states prone to corruption and abuse.
Electricity is less user-friendly than oil. It is hard to store, it loses its oomph when shipped over long distances, and its transmission and distribution require hands-on regulation. But it promises a more peaceful world. Electricity is hard to monopolise because it can be produced from numerous sources of fuel, from natural gas and nuclear to wind, solar, hydro and biomass. Electricity also rewards co-operation. Because renewables are intermittent, regional grids are needed to ship electricity from where it is plentiful to where it is not. This could replicate the pipeline politics that Russia engages in with its natural-gas shipments to Europe. More likely, as grids are interconnected so as to diversify supply, more interdependent countries will conclude that manipulating the market is self-defeating. After all, unlike gas, you cannot keep electricity in the ground.
An electric world is therefore desirable. But getting there will be hard, for two reasons. First, as rents dry up, authoritarian oil-dependent governments could collapse. That will lead to the second danger: the fallout for investors in oil assets. The tension is inescapable. On the one hand government policy should press forward with the transition as fast as it can. On the other, a rapid transition will cause upheaval. Expect the big consumers, especially India and China, to force the pace.’