Gwynne Dyer, Straits Times 17 Jun 08;
'TODAY we witness a very great change for hydrocarbons,' said Mr Alexei Miller, head of Russian oil and gas giant Gazprom, last week.
'(The price of oil is already) very high, and we think it will reach US$250 (S$340) a barrel.'
Cue for legions of financial journalists to faint and writhe in coils at the news of impending economic Armageddon. So will we see some attempt to move away from dependence on oil now?
Mr Miller is the only CEO of a major oil company who is predicting US$250 a barrel oil within 18 months. The others remember what happened the last time the oil price peaked like this in the 1970s.
The big consuming countries responded by cutting back on oil use so drastically that the Opec cartel lost control of the price, which then bumped along below US$20 a barrel through the late 1980s and 1990s.
With the oil price in the high US$130s, we are already seeing a move away from the monster vehicles that became so popular in the US during the cheap oil years. But the 1970s-style of conservation is not going to bring oil prices down this time.
For every American or German switching to a car with lower fuel consumption, there is a Chinese or Indian first-time car buyer taking up the slack and keeping demand for oil high.
So if the car-driving masses are ever to escape from high fuel prices, they cannot rely on simply cutting demand through conservation. They need an alternative fuel.
But the bio-fuels that are now on offer - made from corn, sugar cane, sugar beets, oil palm or soya beans - simply cannot replace oil. There just aren't enough land and water resources to grow bio-fuels and food too.
It would take half the landmass of continental United States to grow enough grain to fuel America's cars and trucks. 'Second-generation' bio-fuels that depend on plants such as switchgrass and willow are better in terms of not competing with food because they grow quickly on waste ground, but they cannot provide the volume of fuel needed either.
So if we are going to go on driving cars, but cannot afford to fuel them from petroleum - and cannot afford to put all those greenhouse gas emissions in the air either - then what do we do instead?
This is where it gets interesting, because there are two alternative fuels that could theoretically be produced in the volumes required, and that would not add to the carbon dioxide in the atmosphere.
One is algae, grown in open ponds on marginal land, or in nutrient-rich sewage farms, or even in completely contained environments in the dark.
Other plants also contain oil, but the great virtue of algae - pond scum, in the vernacular - is that it can double its mass every two hours under ideal circumstances.
That means it can be harvested daily. The US Department of Energy estimates that to replace all the petroleum fuel in the country with home-grown algae fuel would require 40,000 sq km of land, which is less than one-seventh of the area devoted to growing corn in the US.
The oil that is produced can be burned as biodiesel, or further refined until it is almost the same as the fuel we put we put in our vehicles today. It needs no special distribution network, works in unmodified engines and is effectively carbon-neutral. And the biomass that is left after the oil has been extracted can either be fed to cattle or fermented to produce ethanol.
Fuel from algae is not yet ready for prime time, but there are now numerous start-up companies exploring rival ways of growing and processing it.
Oil majors such as Shell and Chevron are already jumping in as well. The main question is cost, but so long as oil stays above US$100 a barrel it's likely that some of these methods will prove competitive.
The other, more radical proposal is to transform carbon dioxide from being the problem to being part of the solution by combining it with hydrogen to make a synthetic octane fuel suitable for use in vehicles.
You get your CO2 from the exhaust gases of coal and gas-fired power plants or just extract it from the air directly - the first prototypes of machines for doing this are now being tested - and you obtain your hydrogen however you like.
Getting hydrogen requires energy, and is only carbon- neutral if the electricity used to split it out of water comes from a non-fossil fuel source such as solar, wind or nuclear. But combining the hydrogen with CO2 avoids the huge problems of storage, refrigeration and high pressures connected with using pure hydrogen as a fuel: The synthetic octane can be handled and burned just like conventional fuel.
One or both of these approaches is going to start challenging conventional oil in the market within five to 10 years if the price of oil stays high. Assurances of supply and cost are the big concerns driving this process now, but the ultimate prize is a vehicle fuel that does not contribute to global warming.
Conventional oil can never offer that advantage, so in the long run it is in big trouble.
The writer is a London-based independent journalist.
