"I feel an oil lobby rising against biofuels"

We often refer to the energy situation in small island states in the tropics (such as Tuvalu, the Dominican Republic, Ile Maurice or Hawaii) and how they attempt to deal with rising oil prices. Being island states, they're extremely vulnerable to increased energy prices, but they also offer a microcosmos showing how the transition to bioenergy may unfold and what 'energy independence' is really worth.

Today we present excerpts from an interesting interview with professor Swalay Kasenally who analyses the energy market as it relates to the Indian Ocean island of Mauritius. The original appeared in French in L'Express.
Prof Swalay has fathered Mauritius' transition to locally produced bio-ethanol but now sees more and more resistance from the oil lobby. He also talks about 'peak oil' and dismisses the doom and gloom ideas some people have about the end of the oil age. Obviously, the crisis in the Middle East features in the interview as well.

How do you see the initiatives taken here in Mauritius aimed at reducing our oil consumption?

We must continue to encourage the production of ethanol and we must keep the mixing process of gasoline and ethanol here on the island. We must urgently move towards a 20:80 formula (20% ethanol/80% gasoline). There is no need for further testing before we can commercialize the product.

The current 10:90 formula is not interesting and I feel that an anti-ethanol lobby is trying to slow things down. That is why I call on all private sector players to stop their internal conflicts and to join their forces to build an ethanol industry, which we should have had a long time ago.

Locally produced ethanol based on sugar cane molasse is competitive with oil. Molasse costs 1500 rupiah (US$ 45) per ton at the factory. We can make a barrel of oil equivalent of ethanol out of this that is cheaper than petroleum at US$ 50 per barrel. And today, oil stands at more than US$ 70.

Some people have very shallow arguments to slow down our transition to ethanol. They spread the rumor that the gasoline we import is different than that of overseas and that it can not be used for mixing with ethanol. In reality of course it's the same product coming from the same refinery. Zimbabwe has been mixing ethanol into its gasoline for over a decade and it comes from the refinery that supplies Mauritius.

What are the risks of a permanent oil supply disruption?


ethanol :: biodiesel :: biobutanol :: biomass :: bioenergy :: biofuels :: energy :: sustainability :: Africa ::

Well experts and oil pessimists have been predicting the end of the oil age for over a hundred years now. Recently others have been joining these 'peak oil' circles but they don't have any new arguments.

The truth is that nobody knows exactly how much oil is really out there. Has oil production peaked? Some think so, but people who master the subject equally well are not convinced at all.

Whatever the real situation might be, the high prices we are currently facing offer reason enough to encourage the development of new technologies with which to enhance the oil extraction process when dealing with existing wells and fields.

We should also re-activate wells that were deemed to be uneconomic a few years ago. Because with oil at US$ 70, these resources become economically viable. In the region known as the 'neutral zone' in Saudi Arabia and Kuwait there are fields that have only been exploited marginally - some 40% of the oil they contain has been extracted. So there remains an interesting potential.

There are very few new reserves that are being discovered, though. For every 3 barrels of oil we consume, only 1 comes from new sources.

Currently, only the oil producing countries do the exploration efforts. New suppliers like Chad or Sudan cooperate with multinationals. However, these new production streams remain relatively small, say 15,000 to 20,000 barrels per day.
Given this situation, it is indeed time to put effort into producing fossil fuel alternatives such as ethanol and biodiesel.
The market for oil products is going to remain extremely nervous because of the political and military situation in the Middle East.


How will the crisis in the Middle East influence current oil prices?

The price is now fluctuating between US$ 72 and 76. This may well escalate to US$ 80 and beyond in the coming days, if Israel's aggression towards Lebanon draws more countries into the conflict.

Besides the Israeli-Lebanese conflict, there is still the Iranian nuclear crisis which threatens the stability in the region more than ever before. The deadlock and the conflict between Iran and the Security Council over the nuclear issue is very frightening.

Iran is the world's fourth largest oil producer. An embargo or sanctions by the UN will provoque very serious reprisals and ruin global energy security. Iran's reaction to possible sanctions may push the price of a barrel well over US$ 100. Iran has already said that it will let "Europeans die in the cold" if ever it came to sanctions. This proves that with Iran, you never know what you get. They are capable of the worst.

On the other hand, the war in Lebanon may continue for a long while. Hezbollah resists fiercely. This conflict holds the potential to drag the entire region into it, if the diplomatic efforts do not succeed quickly in bringing solutions to the problem. Permanent tensions keep the oil price at a high level. Small economies like ours are most vulnerable and bear the burden most.

Moreover, the threats by guerillas against the oil infrastructure in Saudi Arabia should not be taken lightly. It is another factor of instability.

The market for oil products is going to remain very nervous given the circumstances in the Middle East. And then we haven't spoken yet about the political and social tensions in Nigeria, which have a serious impact on global production too.


What would happen in case the situation happened to calm down?

The fundamental price of a barrel floats around US$ 40 to 50. To this, one has to add a risk premious which has to do with the geopolitical situation. But other factors pump up the fundamental price as well.

First of all, the season of tropical storms in the Gulf of Mexico is arriving. These storms present a great menace to the oil installations supplying the United States.

Currently, Europe is in the process of building energy reserves for the winter. This increase in demand can felt in the prices already today.

Thirdly, Asian refineries have done their maintenance work and are now ready to accept crude oil supplies.

Finally, the market is influenced by relatively minor incidents that may yield unexpected consequences. For example, the corrosion problem of the pipeline in Alaska has reduced output by 400,000 bpd. The effect of this single drop in supply has pushed up the price of a barrel by US$ 2. I'm just saying that the equilibrium is very fragile.

One shouldn't forget the growing consumption of India and China either. These countries keep up the price to a certain level, all by themselves. But no single economy will be able to withstand a price of US$ 90 or 100 - not even these large emerging economies. World economic growth will slow down and correct the distortions on the market.

Last but not least, there are the actions of pure speculators who influence the markets.