South Africa: The Oil Crisis and the Search for a New Way of Living

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The South African Civil Society Information Service (Johannesburg)

8 September 2008
Posted to the web 8 September 2008

Saliem Fakir

We live in interesting times that promise both peril and opportunity. Things have changed so fast within the span of just a year that it's putting a strain on our ability to adapt.

It took five years from 2002-2007 for the oil price to go up by $60/barrel; but in the last 12 months, the price of oil surged by an additional $70/barrel.

The surge in oil prices is making life for everybody uncomfortable, as its ripple effects are being felt throughout the global and South African economies. It has, however, brought home the urgency to find solutions. The whole world is in the throes of a massive cycle of innovation. There lie two possible pathways before us.

A whole new generation of sustainable living options are being pushed into the market, having once sat on shelves gathering dust. This is a good thing. Within that market too, different models of sustainable living are competing with each other. These models vary from extending the life of the existing system, to seizing the opportunity to make radical changes to the current system – making it more durable, flexible and sustainable.

The first speaks to continued high growth economies, with centralised economic hubs and energy systems. The other speaks to economic growth paths based on need rather than excess, with localised economic systems and sources of energy.

Two visions that may see themselves exist in one form or the other either side by side with each other or in conflict with each other.

Oil will most likely reach $200/barrel and pressure to find solutions will exert themselves over us for a long time to come.

There are number of reasons for the high oil price. The US is stockpiling oil up to one billion barrels in a huge underground reservoir called the special petroleum reserve and some have suggested that this has contributed to 30 percent of the price surge.

Investors hedging against supply shortages in the future are also having an impact because they are pricing the future value of oil into the present. Swing states like Saudi Arabia would usually increase the supply of oil if prices went too high, but are unable to do so because demand is exceeding production capacity.

There will have to be a trillion dollars worth of new investment in infrastructure to increase oil supply within the next ten years. Therefore, a dive in the oil price in the immediate future is unlikely.

Peak oil pundits suggest that the surge in price may be a sign that we have already reached peak oil. There are opposing views of course. Those who are opposed to alarmist predictions seem to think we have enough oil to last us till 2070.

Those who believe there is enough oil in the ground argue that the high oil price is doing the opposite – increasing the oil reserve and expanding the life span of oil. They point to the fact that the profitably of extracting oil that was previously unrecoverable has improved. Explorations are increasing. Everyday there are new finds.

Most recently, Brazil’s state-owned oil company, Petrobras, announced that it discovered a huge new offshore oil field off the coast of Rio de Janeiro state. It is estimated that the field contains 700 million barrels of crude.

Similar finds are being made in Africa – some estimates suggest that there are potentially 100 million barrels of oil available from African fields, whereas previously it was thought that only 13-20 million barrels were available. The high oil price also makes it possible to produce oil from non-conventional sources like coal, tar-sands, oil shale and natural gas.

There are also biofuels. While first generation biofuels are problematic; world production in biofuels is unlikely to taper in the immediate future. Biofuel may provide some flexibility in terms of fuel options, for the interim, however it will never be the final solution due to shortages of land, water and competition with food demand.

The promise of second-generation biofuels from cellulosic processes is a few years from being commercially viable. The technology remains unproven for large-scale production. Some even talk of a ‘glucose economy’ replacing our oil economy in which the common monomer sugar is turned into fuel and used for other purposes like bioplastics.

There is a half-truth in both the peak oil and non-peak oil debate. In the past we had large supplies in light sweet crude, which is easier to refine.

The light stuff is fast drying up with the supply in the heavier sulphur dirty oil coming more and more into the market. This requires additional refining if you want special ‘cleaning’ - which the current refining capacity is unable to do sufficiently to meet demand.

Peak oil or no peak oil, we are seeing a similar resurgence in investments in renewable energy sources, as was the case in the 1970s when the world faced an oil crisis after the formation of the Organization of Petroleum Exporting Countries (OPEC). The splurge lasted, then, for a short while and over the years, subsidies and investments in renewable energy declined relative to what was available for conventional sources of power.

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