The Dispute on Energy

Today it should be the moment to think in terms of natural gas, the fuel with almost no exhaust, if compared with any other fuel, and therefore the best instrument to organise an orderly passage to the future energy systems.

When the problem of the atmospheric pollution came to general attention, the solution seemed to be simple. Produce electricity from wind or  from the  heat of the sun, both systems that  can actually produce  electricity without any pollution, but  with limitations: only during the day, one, and  when the wind is up, the other. The surplus energy produced when demand is low should be stored, to use it during the peak of demand. However, storing electricity is not easy, and it might be very costly.

At that time, the price of oil was quite high, and the new plants, built with a lot of money from the State, were in fact competitive.  After few years, the fall of crude oil price created a complex  situation .The answers to this new situation were quite different. The oil companies started reducing not only the budget for investment but also the investments in the downstream, that is, refining and distribution. The consumers were quite pleased and thought to pay less for gasoline, and for the electricity in the house, but their expectations were very soon deluded. The State  in its various  expressions  increased its take,  so that the fiscal take reached 67% of the price  of gasoline and 62 % for gasoil ; moreover the  prices  seem to change every day.

The new antipollution entrepreneurs took the opportunity and pressured the State to give them a strong support. So,  the only ones who got an advantage from the low price of oil were the investors in the "renewable" sources of energy.  On the other side, the sellers of crude oil  have  not yet  defined  a  stable  strategy , with the only  exception of  the Saudi , who follow  their own précepte: “ keep  control on  the crude oil market “ and seem to be quite happy  with it. On the other side , there are  those  who  try to find  the optimal mix of energy sources ,which would reduce  the problem of the  atmosphere  without having to pay for  high prices.  Some of them, the ones that started the whole story are now quite disappointed of the limited increase of demand for oil and oil products. Actually, the effort to reduce pollution has not reached the task that were promised, and the permanent use by Germany of its coal and peat does not allow reaching the reduction promised.  

The low price of oil has reduced and in some case cancelled many privileged   position. It seems difficult now to base the energy structure of Europe  on “renewables” plants for electric power that are already non competitive, given the price of oil products. There has been in Europe an excessive interest in electricity, when a great quantity of energy comes from engines which do not run on electricity.  Natural gas is used immediately, does not need to be refined, and can be used equally as energy for a motor car and for an industrial plant. Today  should be the moment to think in terms of natural gas, the fuel with almost no exhaust, if compared with any other fuel, and therefore the best instrument to organise an orderly passage to the future energy systems.

In Europe the question is quite open, and the discussion is quite general. Each country has  his own structure  of demand and supply  of energy  and no general  recipe  seems to be applicable to all members , although there are common structures,  like the network of natural  gas  pipelines. Europe has already a huge gas system, as large as that of electricity.  The network of  gas pipes moves huge volumes of  gas produced  in Europe, imported  from Russia and  Africa, and also volumes that come from the sea , a mode of Natural gas is  not only a  perfect for combustion , it also can explode in an engine  with , of course, a small  adjustment  in the engine transport that is getting quicker  and cheaper.

As natural gas produces the minimum level of  fumes   in respect to any  other combustion, a  sound decision would  be to start  now with the best fuel available,  natural gas,  and progress to the point in the future  in which  all fuels , gas included,  will be no more necessary.  The substitution of gas to all other fuel would be quite relevant for the motor car. Running with gas is much cheaper than gasoline or gasoil, and the gas cars produce almost zero pollution.   A general campaign should be launched to convert cars to natural gas, which should be the only cars allowed to circulate in the cities. That could be done at least in Italy, a country that has already a large number of gas cars and has a distribution network which could service many more cars.

The European network of gas pipelines is comparable to that of electricity but it has one great advantage. Electricity    cannot really be stored, while gas can be fed back in gas fields that have produced  all their gas, and are used as underground deposit, a normal operation to stock gas during the summer, to be used in winter. This possibility to fill with gas the areas exhausted reduces the overall cost of the system.  Of course, Europe would have to define a strategy with its suppliers. New agreements   should define not only the price, but also the guarantee of the supply of the volume of gas agreed on a long term basis.

This  needs not to become a straight jacket, as supply to Europe  may come from US , given  the new rich discoveries of natural gas there, nd from  Africa  with its  rich new discovery  : that  gas might have been  considered for the Chinese market ,  but could  easily be  rerouted to Europe’s market, and  the surplus of natural gas at present existing in the USA might easily  become a supply for Europe. The cost of transport may be reduced by technical developments that are in fact   almost ready. In Italy that would mean a new campaign to discover the gas reservoirs still not explored, especially in the Adriatic Sea, where the forecasts of the experts are quite optimistic.  Italy should mobilize all possible reserves of gas which might develop rapidly, and reduce its cost of energy.

Marcello Colitti

Economist. He was President of Enichem. His last book is "Etica e politica di Baruch Spinoza". Member of the Editorial Board of Insight