Notes on Oil Crises and Energy Alternatives

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• Energy sources overview:
  • Natural gas: cleaner than oil, but limited
  • Coal: large reserves, but dirty and polluting
  • Nuclear energy: clean and relatively cheap, but controversial; France has many nuclear plants; a few other countries are building more
  • Solar energy: useful, especially for heating individual houses; renewable but cannot power all transport and factories
  • Wind power: renewable too, but only possible in windy areas and during windy periods. The problems of solar and wind energies is that they are very expensive and have an environmental impact. They are unreliable, as the sources of energy they use cannot be stored. Consequently, they cannot fully replace conventional electricity plants.
  • Geothermal energy: renewable, but cannot be produced in many places and has a limited use
  • Hydroelectricity is clean but limited to certain areas, and the dams built for its production have had mixed effects: for example, the dams in Aswan (Egypt) and in the Three Gorges area (China) have disrupted the lives of millions of inhabitants
  • Biofuels (made from agricultural plants, like vegetable oil, cornstarch, etc.): fuel plants are renewable but grown to the detriment of food plants, which leads to higher prices and food shortages in some countries
• Electric and hybrid vehicles
  • Electric and hybrid vehicles are gradually replacing petrol-driven vehicles because they are less polluting: but these new types of cars also have disadvantages: they are expensive and use energy stored in lithium-ion batteries that have to be manufactured transported and recharged. The electricity they consume has to be produced essentially by nuclear or thermal power stations, thus displacing the problems, instead of solving them
• Energy savings
  • All these alternatives to oil and oil-consuming products are promising; little by little, they are reducing the world's dependence on oil and its crises, but they cannot eliminate them totally yet. Another way of limiting oil consumption is to conserve energy: turn off your petrol-driven engine when it stops for more than one minute; switch off your lights and electric equipments completely when you no longer need them. All this is good for sustainable development.

1. Crises (pluriel de crise): crise.
2. Crude (oil): (pétrole) brut.
3. Barrel: baril (159 litres).
4. To ship: transporter.
5. Mild: modéré.
6. To shoot (shot, shot) up: monter en flèche.
7. Hike: augmentation.
8. Slowdown: ralentissement.
9. Fracking: fracturation.

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• Consequences of oil crises

• When oil prices fall, there are winners and losers. The winners are the oil consuming countries, for whom the cost of transport, heating, various commodities and products, and even gas, goes down as well. Their inflation rates drop almost effortlessly, and they can spend more money on other things. A 10% fall in oil prices theoretically leads to a 0.001 increase in economic output. The losers are the oil producing countries, especially those with large, poor populations: Russia, Venezuela, Iran, Iraq, Nigeria, Algeria, etc. Even Scotland and Norway, which have smaller and richer populations, feel the impact. Other, less populated countries such as Kuwait, Qatar or Saudi Arabia (which has the world's largest oil reserves) are not as affected, thanks to their huge foreign currency reserves.

• One of the downsides of falling prices is the declining incentive for countries to reduce oil consumption or to develop alternative sources of energy, despite a growing public awareness of the harmful effects of burning fossil fuels: pollution, production of CO2 (a greenhouse gas), depletion of resources, etc. Furthermore, lower oil prices do not always lead to stronger growth: all over the world, oil companies cut their investments in production, research, jobs, and most of all, future production. Nonetheless, oil will remain indispensable for years to come. In conclusion, falling oil prices are a mixed blessing, at least in the long term.

• When oil prices go up, transport costs follow suit, as well as those of other commodities. This has an adverse effect on international trade, economic growth and people's living standards, at least in the short term. Rising prices can lead to speculation, recession and even food riots. The sectors that mostly profit from such hikes are the OPEC countries and oil companies, which make record profits.

• On the other hand, when prices rise, oil consumption goes down, which is good for the environment. People suddenly start remembering that oil wells and oil fields are not bottomless, even if there are still oil reserves for a certain while. Oil prices may fluctuate irrationally, but they will likely go up and up in the long run.

• In either case, volatile oil prices and the heavy dependence of many oil-consuming countries on oil-producing ones have a significant impact on world politics and economic growth. For all these reasons, researching alternative sources of energy is a must.

• Solutions: alternatives to conventional oil

• Today, many alternative forms of energy exist, which helps to smooth over oil crises.

• Shale oil has recently become a major alternative and has played a significant role in the falling prices of conventional oil: huge reserves exist all over the world, especially in the US (which has such a huge shale oil production that the country has become practically self-sufficient), but also in Australia, Sweden, Estonia, etc., and even France, though the government refuses to exploit it. But shale oil extraction is costly and can have harmful environmental effects.

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Oil crises and their consequences
Les chocs pétroliers et leurs conséquences
Oil prices vary according to supply and demand, as well as the type and quality of oil. Several reference prices are now used: Saudi Light, WTI (West Texas Intermediate) or Brent (from the North Sea), which creates confusion. One thing is clear: crises occur when prices fluctuate sharply.

A brief history of oil crises

1973: Although there had been oil and energy crises before, the first major global crisis took the world by surprise that year. The price of crude oil quadrupled in just a few weeks from $4$ to $12$ a barrel, which seemed enormous at the time. The Organization of Petroleum Exporting Countries (OPEC) suddenly decided to stop shipping crude to the countries that supported Israel during the Yom Kippur war, and to raise its prices in general.

1979: Second major oil crisis due to the Islamic Revolution in Iran, which reduced production and raised prices.

1990: The third oil crisis, caused by the Gulf War, was milder and shorter. The price of oil shot up to $50$ a barrel.

Since then, there have been many worldwide fluctuations, some of them particularly intense, with oil prices varying from $25$ to about $150$ a barrel for the best crude oil in the last ten years.

The hikes may be caused by growing demand - especially from big emerging countries like China, political crises, conflicts, rising production costs, fear of shortages, lower production, pressure exerted by OPEC, or market manipulations.

Falling prices can be brought about by declining global demand due to sluggish economic growth or slowdowns, increased production, environmentalist pressure to reduce oil consumption in order to limit pollution or climate change, competition from other sources of energy, or market manipulations.

In 2014-15, oil prices fell sharply across the world, in large part because of weak demand and surging US production due to fracking.