Energy

The Power of the Oil Cartel is Fading

Russia's Energy Minister Novak, Saudi Arabia's Energy Minister al-Falih and OPEC Secretary General Barkindo attend an OPEC meeting in Vienna
When electricity overtakes oil, what happens to the cartel? Source: Reuters (M)

“All men will become brothers,” wrote Friedrich Schiller in his “Ode to Joy.” The optimism reflected in his lyrics in Beethoven’s Ninth Symphony, which was performed for the leaders at the G20 summit in Hamburg, felt a world away. Fierce or smoldering regional conflicts continue in the Middle East, in the Ukraine and around the islands of the East China Sea, and the increasingly strategic rivalry between Iran and Saudi Arabia, not to mention unpredictable North Korea, add up to a pretty depressing picture.

Can the tried-and-tested model of global cooperation in supranational institutions survive, or will it disintegrate in the ongoing conflict of national interests? The new US administration is leading the paradigm shift, and at the end of the day, the G20 summit had no answer.

But this should not distort our view of long-term trends. Future trends in energy, in my opinion, are creating opportunities for a better and more peaceful life for human beings on our planet. That may sound surprising. In the year 2000 the Washington-based Center for Strategic and International Studies wrote: “Geopolitics and energy existed in a symbiotic relationship for most of the 20th century; there is little doubt that this symbiosis will continue.” Is this pessimistic prediction still valid?

I don’t think so. It is true that up to now energy was usually at the center of struggles for power and affluence. Fossil fuels, especially oil, are an integral part of any geopolitical crisis cocktail, like the vodka in James Bond’s martini. But the era of fossil fuels is coming slowly but surely to an end. Not because it is becoming increasingly more scarce, as we used to fear – we are leaving fossil fuels before they leave us. Because renewable energies are becoming increasingly more competitive and we’re reaching another limit: the limit to which the atmosphere can absorb greenhouse gases.

By the middle of this century at the latest, electricity will be the new oil.

That is why the switch to renewable energies is well underway globally, although it will take well into the second half of this century to complete. But in the coming decades, oil and gas will be increasingly less important trump cards in geopolitical poker. OPEC and its members are already fully aware of this. The power of the cartel is waning, not least because an increasing number of countries are focusing on renewable energy and energy efficiency – which will also reduce their dependence on fossil fuel imports.

By the middle of this century at the latest, electricity will be the new oil, and to an increasing extent, this electricity will be produced from renewable energy forms and used increasingly for heating and transport. The electrical society of the long-term future will no longer be based on oil, gas and coal, but on wind, solar energy and other renewable energy sources.

This will also increasingly change the geopolitical landscape because power struggles for wind and sun are pointless. It is capital and innovation that are needed above all to access renewable energy sources, and in principle both are available worldwide.

I’m not saying that renewable energy forms will bring global peace for all eternity. There are too many other causes of conflict, for example, access to drinking water. But we will see that the access to energy will lose some of its huge significance as one of the strategic causes of geopolitical conflicts. A world which relies on wind and solar energy can be more peaceful than the world of the fossil fuel era – providing we take the opportunity seriously.

Renewable energy forms on their own will not make the world a more brotherly place the way Schiller had in mind, but they can improve the conditions for it. Advances in the way energy is used has always been a sign of human progress overall. At this stage, we can only hazard a guess at what changes in society the transition from fossil fuels to renewable energy forms will bring. But why should this transition change the world less than industrialization based on fossil fuels did?

 

You can reach the author at: gastautor@handelsblatt.com

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