Mon, Dec 11, 2006 - Page 9 News List

Kicking the oil habit

Angela Merkel, with a doctorate in physics and experience as an environment minister, is well placed -- as Germany takes over the presidencies of the EU and G8 -- to instigate a bold and concrete proposal on oil-powered cars

By Volker Perthes and Friedemann Muller

German Chancellor Angela Merkel has made addressing climate change a high priority on Germany's agenda for its EU and G8 presidencies that begin next month. Here is a concrete proposal, one general enough for world leaders to consider and accept, and clear enough for other governments and businesses to grasp -- simply set a date, at the next G8 summit, by which oil-powered cars would no longer be licensed in major industrialized countries.

Such a decision would have a strongly positive economic and geopolitical impact. The real cause of today's worries over energy is not the decline in world oil reserves, but rather that domestic oil production by the top consumers -- Europe, the US and China -- will decline at the very moment that growing Asian demand strains the market. Available reserves will increasingly be concentrated in the Middle East simply because supplies in all other regions will be depleted sooner.

Moreover, the main oil exporters are unwilling to subordinate their investment policies to market requirements. Saudi Arabia seeks to run its oil production independently, while Iran scares off potential investors with bureaucratic hurdles and corruption. Iraq suffers from a lack of security, and foreign investors in Russia are thwarted at every turn. Those four states contain half of the world's proven oil reserves and two-thirds of what could potentially be exported. All this, not production costs, lies at the heart of high oil prices and the scramble for oil contracts in Central Asia and Africa.

To believe that high oil prices are good because they serve the environment ignores some basic facts of international politics. First, in many of the poorest African and Asian countries, oil imports account for a significantly higher share of national expenditure than in industrialized countries, which means that economic growth and social development are being imperiled, while new debt crises loom.

Rents received from oil production impede reforms in the major exporting countries. Thanks to their lubricated financial strength, regimes like those in Venezuela and Iran increasingly feel unconstrained by international rules. Latecomers among consuming nations, such as China, mimic the former habits of the industrialized West, with their long record of overlooking human rights abuses in order to secure lucrative deals with authoritarian, oil-rich regimes.

Only the world's political and economic heavyweights, the main industrialized countries that remain by far the biggest consumers of hydrocarbons, can initiate change on a global scale. Change must begin in the transport sector, which accounts for more than half of current oil consumption -- a share that is likely to rise in the future.

The G8 countries should therefore agree to no longer license any new oil-powered cars from 2025 onwards. This decision would not be directed against individual mobility, but against the dissipation of a scarce resource that is more urgently needed to continue to produce synthetic materials.

Political leaders should not privilege any particular technology. Instead, they should provide the automobile industry with incentives to develop alternative technologies that rely on bio-mass fuel, ethylene, hydrogen, and even natural gas during a transition period. Countries that lead the way politically will, as a collateral benefit, provide domestic industries with a leading position in energy technology, ensuring future markets.

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