India: 'outrageous' oil price damages economy, as $80pb could be new floor price
High oil prices have negative impacts on a range of social and economic activities, especially in the developing world. The least developed countries are energy intensive and consequently spend much more on oil as a percentage of GDP than highly developed countries. According to the African Union, Sub-Saharan African countries poured between 10 and 15% of their GDP into oil imports in 2006, whereas OECD countries spent only 1.5-3%. In oil importing poor countries, each price increase can be felt immediately throughout the economy on both the macro- and micro-economic front, with poor classes suffering most (earlier post).
Palaniappan Chidambaram, Finance Minister of India, which is heavily dependent on oil imports, illustrated some of the effects today by calling the current price for crude oil 'outrageous' and damaging the economy's growth.
Chidambaram also warned the depreciation of the dollar vis-a-vis the rupee has thrown up an unexpected downside risk. The Indian currency has strengthened more than 11 per cent in 2007, hurting exporters.
Forecasts: record price guaranteed
Meanwhile, the oil industry says the price is justified because the money is needed to invest in new exploration and refining capacity (earlier post). Recently, Iranian government spokesman Gholamhossein Elham even went so far as to state:
Peak Oil analysts are being taken more and more seriously, because they have been more accurate in their predictions. So what do they say? The Association for Peak Oil & Gas (ASPO) concluded at its latest annual conference that the new floor price of crude oil is $80 per barrel. The projection was shared by Ray Leonard, Vice-President of Kuwait Energy Company, James Buckee, CEO Talisman Energy, Jeff Rubin, chief economist of the Canadian Imperial Bank of Commerce and James Schlesinger, former U.S. energy secretary. Today, the ASPO's 1 year forecast stands at $107 pb.
Obviously, a price bracket of $67 to $80 makes biofuels a must for developing countries. Many first-generation fuels can be made at costs well below these prices, and we see a continued push into 'tropical' and 'subtropical' biofuels next year dominated by ethanol made from sugarcane (average production cost in Brazil: $37 per barrel of oil equivalent), sweet sorghum and cassava (projected production cost in Thailand: $38pboe), and by biodiesel made from palm oil (projected cost in Malaysia: $55pboe), jatropha and soy oil. But at $80-100, some second-generation biofuels too become competitive with crude. Amongst these, fast-pyrolysis based fuels and synthetic biofuels based on the Fischer-Tropsch process would be commercially viable (earlier post). Cellulosic ethanol based on enzymatic hydrolysis would require higher prices still. With the current state of technology, algae-based biofuels would need an oil price bracket of $120-150 to be competitive.
Catastrophy for poor countries
In energy intensive countries, the macro-economic effects of high oil can include higher inflation (including increased food prices), less economic growth, higher unemployment, and a weakened capacity to ease the debt burden:
energy :: sustainability ::biomass :: bioenergy :: biofuels :: crude oil :: peak oil :: energy intensity :: developing countries :: India
Such countries do not have the technical and financial instruments to deal with oil shocks, such as reserves and finetuned monetary policies. Most importantly, governments are often forced to cut spending on social services, with the UN finding that some of the poorest countries are already spending twice as much on importing oil than on such basics as health care. Of course, the poor suffer under all these factors most.
On the micro-economic front the consequences depend on government policies. In countries where fuels are not subsidized, the effects for the poor can be truly catastrophic: higher costs for food, for heating and cooking, and less mobility. Energy can take up to 30% of the household budget of families in the least developed countries. Farmers have a reduced capacity to bring their produce to market - a major problem in the Global South, where the majority of people live in rural areas and is employed in agriculture.
When petroleum fuels are subsidised, as is the case in India, the costs are transferred to the government, which then has a reduced capacity to invest in state and social services (education, health, security, etc...). Ultimately, the costs arrive at the population at large.
A more extensive overview of the effects of high oil prices on the least developed countries can be found here.
References:
The Economic Times: FM warns against crude oil prices hurting GDP growth - September 27, 2007.
Reuters: Oil prices seen surging to record level next year - September 26, 2007.
Peakoil Netherlands: Iran: oil at $80 per barrel is cheap - September 24, 2007.
Biopact: High oil prices disastrous for developing countries - September 12, 2007
Biopact: Report: synthetic biofuels (BtL) and bioenergy efficient, competitive and sustainable in Germany - September 22, 2007
Article continues
Palaniappan Chidambaram, Finance Minister of India, which is heavily dependent on oil imports, illustrated some of the effects today by calling the current price for crude oil 'outrageous' and damaging the economy's growth.
India imports nearly three-fourth of its crude oil requirement and spent more than $57 billion in 2006-07 for the purpose - almost equal to the country's entire trade deficit. Government has not allowed state-run oil marketing firms to raise fuel prices in line with cost and India's three main oil companies are projected to suffer a revenue loss of about 13 billion dollars this year.The price of crude oil is an enormous external risk. Since these outrageous prices cannot be fully passed through to the consumers in India, the burden falls largely on the domestic budget and constrains our capacity for investment. - Indian Finance Minister Palaniappan Chidambaram
Chidambaram also warned the depreciation of the dollar vis-a-vis the rupee has thrown up an unexpected downside risk. The Indian currency has strengthened more than 11 per cent in 2007, hurting exporters.
Forecasts: record price guaranteed
Meanwhile, the oil industry says the price is justified because the money is needed to invest in new exploration and refining capacity (earlier post). Recently, Iranian government spokesman Gholamhossein Elham even went so far as to state:
We, the oil exporting countries, believe the oil price is low and is not the real value of this important material of the world’s energy [mix].Reuters published a poll on Wednesday asking petroleum (establishment) analysts to predict the average price for US crude oil in 2008. The result: $67 per barrel. However, Goldman Sachs, the most bullish in the poll, predicted WTI crude to average $85 next year with prices climbing as high as $95 by the end of 2008.
Peak Oil analysts are being taken more and more seriously, because they have been more accurate in their predictions. So what do they say? The Association for Peak Oil & Gas (ASPO) concluded at its latest annual conference that the new floor price of crude oil is $80 per barrel. The projection was shared by Ray Leonard, Vice-President of Kuwait Energy Company, James Buckee, CEO Talisman Energy, Jeff Rubin, chief economist of the Canadian Imperial Bank of Commerce and James Schlesinger, former U.S. energy secretary. Today, the ASPO's 1 year forecast stands at $107 pb.
Obviously, a price bracket of $67 to $80 makes biofuels a must for developing countries. Many first-generation fuels can be made at costs well below these prices, and we see a continued push into 'tropical' and 'subtropical' biofuels next year dominated by ethanol made from sugarcane (average production cost in Brazil: $37 per barrel of oil equivalent), sweet sorghum and cassava (projected production cost in Thailand: $38pboe), and by biodiesel made from palm oil (projected cost in Malaysia: $55pboe), jatropha and soy oil. But at $80-100, some second-generation biofuels too become competitive with crude. Amongst these, fast-pyrolysis based fuels and synthetic biofuels based on the Fischer-Tropsch process would be commercially viable (earlier post). Cellulosic ethanol based on enzymatic hydrolysis would require higher prices still. With the current state of technology, algae-based biofuels would need an oil price bracket of $120-150 to be competitive.
Catastrophy for poor countries
In energy intensive countries, the macro-economic effects of high oil can include higher inflation (including increased food prices), less economic growth, higher unemployment, and a weakened capacity to ease the debt burden:
energy :: sustainability ::biomass :: bioenergy :: biofuels :: crude oil :: peak oil :: energy intensity :: developing countries :: India
Such countries do not have the technical and financial instruments to deal with oil shocks, such as reserves and finetuned monetary policies. Most importantly, governments are often forced to cut spending on social services, with the UN finding that some of the poorest countries are already spending twice as much on importing oil than on such basics as health care. Of course, the poor suffer under all these factors most.
On the micro-economic front the consequences depend on government policies. In countries where fuels are not subsidized, the effects for the poor can be truly catastrophic: higher costs for food, for heating and cooking, and less mobility. Energy can take up to 30% of the household budget of families in the least developed countries. Farmers have a reduced capacity to bring their produce to market - a major problem in the Global South, where the majority of people live in rural areas and is employed in agriculture.
When petroleum fuels are subsidised, as is the case in India, the costs are transferred to the government, which then has a reduced capacity to invest in state and social services (education, health, security, etc...). Ultimately, the costs arrive at the population at large.
A more extensive overview of the effects of high oil prices on the least developed countries can be found here.
References:
The Economic Times: FM warns against crude oil prices hurting GDP growth - September 27, 2007.
Reuters: Oil prices seen surging to record level next year - September 26, 2007.
Peakoil Netherlands: Iran: oil at $80 per barrel is cheap - September 24, 2007.
Biopact: High oil prices disastrous for developing countries - September 12, 2007
Biopact: Report: synthetic biofuels (BtL) and bioenergy efficient, competitive and sustainable in Germany - September 22, 2007
Article continues
Thursday, September 27, 2007
European Plant Science Organisation calls for more action to kickstart the bioeconomy
In 'Sustainable Future for Bioenergy and Renewable Products' [*.pdf] Europe's plant scientists state they are willing to take a responsible role in the implementation of a sustainable future bioeconomy by developing the knowledge and skills required for obtaining increased quantities of biomass suitable for conversion to biofuels and to renewable resources, at economically competitive prices, and within an environmentally and economically sustainable agricultural system that is an essential part of a future bioeconomy.
Societal and economic relevance
Today’s economies are based on carbon resources of fossil origin, which provide societies with their major energy sources and raw materials for chemical production. However, several major challenges for mankind arise from this approach:
- the use of these fossil-based resources as fuels, but also as non-degradable substances and composites, causes severe regional and global environmental problems, including CO2 emissions for which there is increasingly compelling scientific evidence that they are a major contributory factor in global warming and climate change;
- the availability of fossil resources does not match the expected increase in consumption of energy and raw materials in the future;
- the distribution of fossil carbon sources around the globe makes them an even less reliable source in the future.
These aspects make clear that the present high dependence on fossil fuels is not sustainable. Together with the economic fact that energy and raw material prices have drastically increased over the last decade, these factors necessitate the development and establishment of alternative concepts and products.Bio-based strategies hold great promise for sustainable solutions and are presently being developed worldwide to contribute significantly to the future mix of energy sources. Plants provide the major source of organic substances on our planet. They include relatively under-utilised forms such as cellulose, hemicellulose, starch, lipids and lignin that have major potential for use as raw materials for energy and industrial feedstocks. Significant impact is expected from bioenergy with respect to mitigation of climate change, development of rural areas and employment options as well as the provision of alternative energy forms. This is especially true for fuels used in transportation.
However, in order to make bioenergy a sustainable alternative, a holistic approach is needed, which:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: biomaterials :: green chemistry :: bioconversion :: plant science :: biotechnology :: bioeconomy :: EU ::
- improves biomass supply with respect to amount and quality
- improves conversion of biomass into other energy forms
- reduces or eliminates toxic waste products
- develops zero-waste biorefinery concepts for efficient conversion of plant raw materials into diverse products
- manages bioenergy production systems in a sustainable manner
- has minimal impacts on the environment
Effective and multilateral networking between the different, hitherto separated, research communities will be crucial to make bioenergy and bioeconomy a sustainable success. This approach will form the basis for the network required for a knowledge-based bioeconomy (KBBE) and will also provide new opportunities to farmers, the forestry sector and other stakeholders.Plant science: creating the knowledge base for the bioeconomy
As plants will provide the major resource in a KBBE, plant science will play a major role in developing the capacity and novel opportunities for a bio-economy in line with the environmental and economic settings in Europe. European plant science is very well positioned to contribute with its strong expertise to obtain increased quantities of biomass at adequate qualities for the various optional routes of conversion, at economically competitive prices and with acceptable impacts on the environment.
There are numerous fields of action in which knowledge from plant sciences on agriculture and forestry crops needs to be used to deliver to the overarching aim of a sustainable bioenergy economy:
Higher biomass production urgently needed
This includes activities that increase biomass potential through direct improvement of growth and biomass production. This can be realised by increased growth rates, prolonged vegetation periods, or improved architecture of crops. It can also be achieved by reducing the loss of biomass due to pathogens and pests, by improved stress tolerance to allow using marginal lands and to lower competition with food production. Since the amount of biomass has to be enlarged significantly, all possible options have to be addressed in parallel.
Improved bioconversion for bioenerggy and biomaterials
This requires strong interdisciplinary interactions with microbial, chemical, engineering and process sciences to develop new industrial processing methods. In plant science, activities include modifying cell wall structure and composition to increase the ease with which it can be decomposed into units that are either themselves useful as biofuel, or are good starting points for the production of chemicals. Enhancement other aspects of the organic and inorganic composition of biomass with respect to the conversion processes (e.g. removing compounds inhibiting decomposition or fermentation, reducing alkali for improved combustion behaviour, etc.) and residue handling should also be achieved. Improving composition of harvestable plant biomass will also be beneficial, for example to provide lignin more suitable for making lignin-based composites.
Improved resource use efficiency
This is the key to higher biomass yield at low environmental impact. Achieving this includes improving processes such as energy collection through enhanced photosynthesis efficiency and nutrient use efficiency. This will reduce the dependence of plant growth on the application of additional inputs such as fertilizers that require high amounts of energy for production and have a deleterious environmental impact. Also topics like nitrogen-fixing bioenergy crops, associations with beneficial soil microorganisms and improving phosphate use efficiency are of prime importance to address decreasing availability and anticipated rising costs of fertilisers. Furthermore, minimising the water consumption per unit of energy gained is critical because fresh water will be a key limiting factor for food and energy production in the future on marginal land and with changing climatic conditions. Utilisation of plant varieties that can remove harmful substances from water and soil (e.g. excess nitrogen in overfertilised land, excess salt in highly irrigated land) can even provide additional beneficial effects.
Increased genetic diversity of bioenergy plants
This is key to achieving new properties in bioenergy crops. A bioenergy roadmap needs to be established and will include (i) the use of traditional food crops for which all the scientific tools are available, (ii) the development of novel crops via genomics-driven domestication of hitherto not or not significantly used species, (iii) the development of specific energy crop rotation systems and (iv) the use of the different options originating from agriculture, forestry or even an biofactory (e.g. algae) approach. Actions include the development of specific energy crops having improved properties in comparison to the classical crops, probably via an initial round of genomics-supported breeding, followed by introducing novel features through smart breeding or genetic modifications. Throughout the introduction of novel species, their potential to displace native species and their potential impact on biodiversity needs to be considered. It will be crucial to address the alternatives of food and energy utilisation.
Plant research in tune with bioenergy and environmental sciences
Plant scientists in Europe are prepared to take this challenge in close coordination with researchers and engineers in related disciplines in order to develop a new, sustainable and economically viable bioenergy sector within the bioeconomy of the future. Integration of plant research programmes must be obtained with:
- White biotechnology: in order to obtain new biocatalysis features to form useful energy sources (e.g. bioethanol, biogas, etc.)
- Conversion technology, chemistry and chemical engineering: significant interaction is required to obtain useful breeding targets on quality and quantity of biomass supplied to the alternative conversion routes.
- Agricultural and forestry management, ecosystem and biogeochemical research: as the production of large scale biomass for bioenergy will be done in new production systems, new plant features must be integrated in them and they must be checked for their biogeochemical impacts.
- Agricultural and forestry management and economics: it will be important to consider the potential to utilise non-food components of existing crop plants (e.g. straw, stover) for bioenergy as an added-gain that does not jeopardise food/feed production, and to consider how new dedicated energy crops are best integrated into agricultural practice and rotations in a manner that aids rather than competes with food and feed production.
- Sustainability assessment: for an ecologically, socially and economically viable bioenergy sector, impact analysis on all the above stated aspects must be integrated and evaluated in macro and microeconomic contexts. It is important to provide society with scientifically validated information about options using transgenic and/or clonal plants and on the conversion of marginal land, grass or agricultural land and forests into efficient production units for various energy feedstocks. A thorough discussion of the balance between food-feed-energy outputs from agriculture must be based on sound scientific evidence.
Taking significant steps forwardThis concept for a sustainable bio-economy is in agreement with the strategic research agenda (SRA) of the European Technology Platform ‘Plants for the Future’ published in June 2007. EPSO member institutions are committed to contribute to the implementation of the SRA, but significant steps are required in a coordinated manner between stakeholders from the public and private sector to transfer this plan into action:
- significant investments into research and implementation similar to those presently done in leading countries outside Europe at national and European levels;
- co-ordination with industry as well as governmental agencies and NGOs;
- co-ordination and development of a common research agenda between all platforms committed to the idea of a sustainable knowledge-based bio-economy along the entire value chain.
EPSO published a position paper entitled ‘Sustainable future for bioenergy and renewable products’ and opened an internal discussion on it, asking its members to comment and send their feedback. After compilation and integration of the replies, the position paper was presented by Uli Schurr to the participants of the Venice Conference 'The Future of Science - The Energy Challenge' on 21 September 2007.By publishing this present paper, EPSO wants to take an active role in the current debate about bioenergy and the potential ways to address this societal challenge. It presents insights on how research activities can contribute to tackling issues such as: How plant science can contribute to achieving the 10% goal for biofuels by 2020? What can plants do and not do? How can EPSO contribute?
The text was developed by an expert group comprising Mike Bevan (John Innes Centre Norwich, UK), Wilhelm Gruissem (ETH Zürich, CH), Hermann Hoefte (INRA, FR), Dirk Inze (VIB Gent, BE), Karin Metzlaff (EPSO, BE), Ulrich Schurr (Institute Phytosphere Jülich, DE – chair of the group), Mark Stitt (MPI Molecular Plant Physiology Golm, DE) and Björn Sundberg (Umeå Plant Science Centre, SE).
References:
EPSO: EPSO position paper 'Sustainable Future for Bioenergy and Renewable Products' - September 27, 2007.
EPSO: Sustainable Future for Bioenergy and Renewable Products [*.pdf] - September 2007.
Biopact: 'Plants for the Future' technology platform presents plan for European bioeconomy - July 02, 2007
Article continues
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