Thoughts about energy and development

Remember the energy shocks of the 1970's. The price of oil went up, and poor countries faced huge energy bills. Oil exporting countries were afloat with money, and loaned it in huge amounts to developing nations. Then in the 80's interest rates went up, and there was a lost decade for development, leading to programs for debt relief and debt forgiveness.

So energy prices have gone up again to historic highs. High energy costs are expensive for developing countries in any case. Their transportation systems are often not energy efficient. A lot of their electricity generation is based on relatively small facilities, and indeed due to uncertain electrical power availability and limited distribution webs, a lot is generated in household size motor generator sets, which are inefficient. Even without the double wammy of increased debt and then skyrocketing debt service costs, the impact on development is harsh. Let us hope that we do not repeat the errors fo the past and condemn the poor to another "lost decade".

It seems we are in a cycle, as a globalized energy system is beyond the control of any nation state. It takes years to develop a new oil field. It also takes years to disseminate the energy saving measures that reduce demand. When there are a few good economic years, as there were recently, the demand for oil increases rapidly, supplies can not respond, especially if there are any problems such as those in Iraq and Nigeria that limit supplies. Prices rise. Investment in energy systems gets interesting, and the that drives prices down after a few years or a decade.

Longer term efforts, such as the research and development needed to make renewable energy sources economically efficient or to create new energy efficient transportation technologies get started during the hard years, but governments lose interest in the years when energy prices are driven down. So the next time energy prices rise again, we still do not have the alternatives that we need.