When you spill, don't lose the lesson

The oil spill in the Gulf of Mexico has not only attracted widespread attention and created a major political fallout in the US, but has posed some major issues that impact the future of global energy policy and the international response to the growing challenge of climate change. Some general inferences can be drawn from this tragic occurrence, which has not only led to the loss of human life, but is continuing to threaten marine life and coastal areas in the Gulf.

The first major inference relates to the manner in which decisions are taken for deep sea exploration that were infeasible in the past. Today, deep sea drilling technology has been perfected to a level where going as deep as several kilometres has become routine. However, before a project is implemented for drilling at such depths, seldom is a proper analysis of possible scenarios carried for assessment of consequential risks.

It is obvious that there is a lag between the use of deep sea drilling technology and the development of solutions which could be implemented promptly and

effectively in the event of a major disaster taking place. Unfortunately, regulations that might ensure appropriate safety measures in the event of disasters (which may be low in probability but high in impact), have lagged behind. The US in particular is likely to put in place effective regulatory measures by which this gap hopefully will be filled with safeguards preceding offshore drilling in these high risk areas.

The second major inference from this disaster is the fact that there would be a timely reappraisal of how far our thirst for oil should take us to different regions of the globe. A recent article in Newsweek mentions that if the oil industry has its way, we may have more such unplanned experiments as we have seen with the Deepwater Horizon disaster in the Gulf. It is estimated that there are 30 billion barrels of crude oil equivalent beneath the Gulf of Mexico's ultra-deep waters, that is depths below 6000 feet. It is reported that in 2008, Shell finished drilling an oil well 9000 feet under the gulf and BP has another well 7000 feet below.

All of this raises a very fundamental question about energy policy. Former US president George W. Bush deprecated the fact that Americans are addicted to oil. Unfortunately, the rest of the world, and certainly countries like China and India, are blindly following the US example. The question is whether we can rely on the growing demand for oil being met at reasonable prices. This seems very unlikely given the fact that even the International Energy Agency (IEA) has revised its estimates of oil production downwards in recent years. One statement that has been made by the IEA is very pertinent in defining future global energy policy - "sustained investment is needed mainly to combat the decline in output at existing fields, which will drop by almost two-thirds by 2030". If the oil spill in the Gulf leads to stringent regulation and restriction on drilling in offshore and other difficult areas, clearly the decline in existing reserves is unlikely to be made good through new discoveries. At the same time, demand for oil is continuing to grow notwithstanding the slight pause due to the recent economic recession. However, even in North America, demand for automobiles has picked up again, assisted by government support for the automobile industry and programmes like "Cash for Clunkers". According to the IEA's reference scenario, non-OECD countries will account for 93 per cent of the increase in world primary energy demand and all the growth in oil demand, which will rise from 85 million barrels per day in 2008 to 105 million barrels per day in 2030.

All these facts also have to be seen in the context of the need to mitigate emissions of greenhouse gases. One of the major findings of the Fourth Assessment Report (AR4) of the Intergovernmental Panel of Climate Change (IPCC) is the fact that mitigation of emissions is accompanied by large scale co-benefits such as reduced air pollution, higher energy security and greater employment (such as with a shift to renewable sources of energy). The Gulf oil spill also reminds us that another major co-benefit could be avoidance of marine pollution and damage to vulnerable coastal areas. In the case of India, a lack of coordinated attention to energy security issues is propelling the country towards crisis. TERI has carried out detailed analysis of future prospects using an extensive energy economy model, which reveals that on a business-as-usual basis, at the end of two decades from now India may be importing 750 million tonnes of oil and 1300 million tonnes of coal. Now that coal prices exhibit similar increases as the price of oil, it is obvious that with this level of import dependence on fossil fuels, India is certainly not moving towards an energy secure future. The answer lies in substantial improvements in energy efficiency and a shift to renewable sources of energy, all of which would require a major restructuring of the economy and changes in lifestyles. For instance, our growing dependence on private vehicular transport would only increase our vulnerability to substantially higher oil imports. Price increases in the global market could hit India's economy to a disastrous extent. It was only three years ago that global oil prices reached a level of $147 per barrel, and given current trends in the global market a similar level of global prices cannot be ruled out in the not too distant future.

The Gulf oil spill certainly has major lessons for the global community, but it is in India's interest to learn from it before developments force us into taking action that over time would become much more expensive. For instance, it is cheaper for us to improve the efficiency of our buildings, factories and commercial complexes right now than to have to retrofit them with efficiency enhancing measures in the future. Likewise, for us to enhance our public transport infrastructure and modernise the Indian Railways today is preferable to being forced into doing so in the wake of unacceptably high oil prices in the future. If we learn these lessons today, then perhaps the Gulf oil spill would leave us wiser.