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Shrinking supplies of energy call for action

Oil prices jumped from a low point of US$22 a barrel in 2002 to a new high above US$70 a barrel last week.

This rising trend has caused bus and plane ticket prices to go up. This time last year, a one-way air ticket from Chicago to Washington only cost US$198. Now, that same ticket costs US$339.

Some blame the price hikes of the past few years on the US-Iraq war, and see last year's hikes as being a result of Hurricane Katrina.

However, the real structural reason is that international demand for oil outstrips supply, and newly-discovered oil volume is lower than forecast future needs.

According to the International Energy Agency, global demand for crude oil outgrew crude supplies last year.

After the annual global surpluses of the past, we have now entered a more difficult era when supply will fall short of demand.

Oil production has already set a new high: 1,000 barrels per second, or 86 million barrels per day. Perhaps these figures are hard to grasp.

Let us imagine it in another way: The crude we pump would fill an Olympic-sized swimming pool in just 15 seconds, and we consume a total of 5,500 pools of oil per day.

Since oil prices are still climbing, strong demand should, in theory, stimulate production.

However, crude is not a regenerative resource. It is not like water, easily available whenever we turn on the faucet.

Unfortunately, most oil fields that are easily harvested are old and have run dry.

Areas that are easy to explore have also been thoroughly tapped.

Rising prices drive geologists to even tougher environments in search of "black gold" -- from the 42oC burning desert of Saudi Arabia, to the extremely windy northern Siberia and the guerrilla-controlled tropical jungles of West Africa, to the deep seas.

Exploration in such tough environments, as well as pumping oil and shipping it over long distances all require a lot of money.

Today, oil exploration and shipping costs are as high as US$20 per barrel. These investments are highly risky, and take longer to show a profit.

Under such circumstances, how can oil prices come down?

The imbalance in energy supply and demand, as well as price hikes for various types of energy and goods, are pushing the world toward a critical point.

Control over sources of oil is related to each country's economic development and the battle for them is crucial to international relations.

The drawing of an exclusive economic zone in a country's sea territory also concerns its rights to oil sources in that area.

All these issues spell out a new framework for international diplomacy and geopolitics.

With all oil wells set to dry out eventually, research institutes are silently developing new technologies to find a replacement source of energy. Perhaps a new Thomas Edison or Bill Gates is doing research somewhere out there.

The potential for shortages of energy sparking wars over limited energy resources is a frightening prospect.

But new inventions and new energy technologies are also likely to be implemented. We have to act cautiously.

We should not worry over whether Chinese Petroleum Corp will raise its oil prices next week.

Rather, we should worry about whether Taiwan has a lasting oil policy.

Wei Kuo-yen is a professor in the department of geosciences at National Taiwan University.

Translated by Eddy Chang
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