What price energy?

21 June 2008

HIgh prices for energy and our discretionary income

On Friday, the Saudi oil minister said current elevated oil prices - which hit a record high of more than $139 (£71) a barrel last week - were unjustified. Saudi argues that speculators rather than any shortage of crude oil cause the current high prices. Whatever the reason, now is the time for leaders in the West to think about how we can all reasonably reduce our dependence on fossil fuels. If the Saudis are right then Gordon Brown, his government and opposition should consider the current situation a strong warning and further evidence that we need to invest now in alternative power sources to ensure our energy security. The Sunday Times quotes that Tesco has seen all the financial savings from a scheme to reduce (halve) energy consumption wiped out by soaring prices. The green issue isn’t about price. It's about climate and our dependence on fossil fuels. If we reduce our dependence on fossil fuels we reduce the environmental impact of our power consumption and the reduced demand ultimately reduces the pricing influence of oil. We continue to buy power hungry appliances and toys for our children and teenagers - think ipods, Nintendos and portable DVDs. That they use rechargeable batteries, which is so much better for the environment than alkaline and lithium disposables, is great, but if the power is fossil fuel-sourced then it is still polluting and maintaining our dependence. I’m not suggesting we go back to living in caves. I just think now is the time to consider where the power comes from, if we want to maintain our lifestyles. If you have a car, a microwave, a video, a computer and your toilet cubical has a door you are in the top 1%* of the world's population. The point is that we have discretionary income in the western economies. We might not think so today, the dinner party and pub topics of the moment are falling house prices and rising diesel costs, but compared to the emerging nations we have plenty. If we don’t do something to steer the world away from a dependence on fossil fuels, their finite supply will come to an end all the faster and we won't have ready alternatives. The silver lining of high oil prices supporting greater investment in renewable and emerging technologies is a hard pill to swallow when everything seems to be inflationary, but as a long term prospect it’s silver, believe me!” *Caux round table