TCS Daily

Beyond The Village People

By Nick Schulz - April 25, 2003 12:00 AM

Fareed Zakaria, the influential writer and author of the important new book The Future of Freedom, provided some useful perspective on globalization and technology in a recent interview with New York magazine. Describing his support for economic liberalization - warts and all - Zakaria said his views were shaped by the fact that after living in India, "You are very quickly inured to the charms of pre-industrial village life."

Lifting millions of people around the globe out of poverty will take time and, more importantly, energy. To understand how so - and how much - it helps to look at some numbers.

According to the U.S. Department of Energy's Energy Information Agency, over the next two decades, "world energy consumption is projected to increase by 60 percent... Much of the growth in worldwide energy use is expected in the developing world."

The developed world today accounts for most energy consumption, but the gap in energy demand between developed and developing regions is shrinking rapidly. In just two decades, EIA estimates developing countries are expected to "consume almost 90 percent as much oil as the industrialized world... As the energy infrastructures of emerging economies improve, people are turning from traditional fuels like wood burning for heating and cooking to electricity, and additional petrochemical feedstocks are being used for industry."

Barbara Freese reminds us in her compelling but flawed book Coal: A Human History, Britain was decimating its forests in the 17th and 18th centuries to provide wood fuel to power businesses, hearths and stoves. The British were able to save their forests by instead harnessing the power of coal to meet their energy needs. In the same way, today's developing world will shift from wood and dung to more efficient energy sources - oil, natural gas and coal - to kick-start their economies.

A developing world needing inexpensive, reliable sources of energy is driving the current efforts to meet that demand. For example, the global demand for oil will jump "from 76.0 million barrels per day in 2001 to 112.0 million barrels per day in 2020" and global energy use will climb "from 382 quadrillion British thermal units (Btu) in 1999 to 612 quadrillion Btu in 2020," according to the U.S. Department of Energy. Developing Asia and Central and South America alone will account for "half of the total projected increment in world energy consumption and 83 percent of the increment for the developing world alone."

Those are big numbers, requiring large supplies. And if those demands can be met, there is great hope here. As countries and regions develop, their standards of living improve. The Danish statistician Bjorn Lomborg noted in The Skeptical Environmentalist: Measuring the Real State of the World, development and economic growth have raised life expectancies and diminished poverty and starvation.

This process is not without problems or complications, of course, but as it happened in the Western industrialized countries and in the Far East, it is poised to happen in other parts of the world desperate for development.

There are, however, some potential obstacles to development and economic growth. Among them are finding, harnessing and maintaining the supplies needed to power the technologies enabling development. So how does the supply picture look?

Over the next two decades, according to EIA, there will be a "1.0 million barrel per day decline in production in the industrialized nations [such as] the United States, Canada, Mexico, Western Europe, Japan, Australia, and New Zealand." Supplies in these parts of the world have already been tapped and are slowly dwindling or extraction and development are becoming prohibitively expensive.

So in addition to supplies from OPEC countries, future energy needs can only be met by increased production from elsewhere such as Russia, the Caspian, Africa, and South and Central America. There are abundant supplies in these regions - for example, in the Atlantic basin.

According to EIA, "several West African producers (Angola, Cameroon, Chad, Congo, Gabon, and Ivory Coast) are expected to reap the benefits of substantial exploration activity. ... Angola is expected to become a million barrel per day producer early in this decade... The other West African producers with offshore tracts are expected to increase output by up to 1 million barrels per day."

The problem here is that these African countries (as well as other parts of the globe like the Caspian region) are often home to undesirable, even despotic, political leadership. And these leaders must be dealt with in order to capture and maintain supplies.

Some press accounts have cynically fingered energy producers for working hand in glove with despots in developing countries. In a typical story, Forbes magazine recently put it this way: "If you are running a big oil company, you either deal with despots or watch your company liquidate itself." The magazine also quipped: "To keep America's SUV owners happy, oil companies get in bed with bad guys." ("Dangerous Liaisons", Forbes, April 28, 2003).

That's a grossly unfair characterization - something one would expect from political cheap shot artists Bill Maher or Arianna Huffington, not a leading business publication.

Either way, it's a distortion of global energy realities. The U.S. government numbers show just how much the world energy demand is expected to grow over the next few decades. And much of this demand will be from the poor, developing world. So another, and more accurate, way of summarizing the global energy situation, is to say: "If you are interested in helping development in the poorest parts of the world, you either deal with despots or kiss development goodbye."

Consider India. According to the Department of Energy, "India is projected to be among the world's fastest growing economies... and its oil consumption is projected to grow by 4.6 percent per year on average from 1999 to 2020, to nearly 4.9 million barrels per day. The country depends on oil for about 33 percent of its total energy needs and imports about 1.3 million barrels per day or two-thirds of its crude oil requirement."

This may require companies and governments to deal with, as Forbes put it, a "new gang of global bad guys." But for the critics of this approach, it's up to them to provide those suffering in the "pre-industrial village" with a viable alternative.

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