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World energy issues: Part 2

Hydrocarbon Engineering,

Part 1 looked at macroeconomic risks that are being face by the global energy industry as well as vulnerabilities and geopolitical instabilities. The discussion of issues currently being faced by the global energy industry is continued below.

Energy policies and business environment

Trade barriers always cause considerable problems to arise. The sanctions placed upon Iran are a recent and prime example of this as well as the export bans in place in the USA. Not only do trade barriers hinder the movement of energy and fuels, it also constrains the transfer and development of technology which is needed by the industry if demand levels and green growth is to be met.

A lack of regional interconnection always has the potential for causing problems for the business environment. This includes the underdevelopment of regional infrastructure and the potentially high cost implications of unequal distribution of resources. Also included in this is debates surrounding large new connection and distribution projects such as the Keystone XL which has been a hotly discussed topic for a long time. Overcapacity and underinvestment can also impact regional interconnection as well as business cycles as a whole as they lead to growth constraint, which as global demand levels increase, cannot be tolerated.

Energy subsidies are one financial mechanism that can cause great instability in the market. Russia is home to a heavily subsidised oil industry, so despite demand level fluctuations the industry never has to suffer and close down processing or production capacity. This does however, place non-subsidised countries and industries at great disadvantages as they are forced to compete with stable markets and prices. Also, there is the continued debate surrounding the sustainability of subsidies.

Energy vision and technology

Sustainable energy, cities and nations is always the vision held by governments and policy makers. However, this doesn’t only extend to sustainable energy resources. For a region to be sustainable in food, water and goods is also what is desired to an extent. Renewable energy would of course enable a sustainable nation, but with prices of fossil fuels dropping, it is hard for development to remain in motion and for investments to be secured.

Biofuels are always debated. They play a large part in the food/water nexus discussed in part 1 as they require large volumes of products such as grain which many debate could be used as food. Also, once again they require technological investment, so, there are many barriers that need to be overcome for their potential to be achieved.

Energy efficiency is a hot topic at the moment and is always being strived for around the world as at the moment, 88% of primary energy is thought to be lost and only 12% ends up as useful light, heat and motion. However, there are, similarly to many of the issues in this section, barriers to overcome with not only implementation but investment. Flaring is one topic within the oil and gas industry that would help achieve energy efficiency goals but money is needed to develop efficient flaring technologies and then install them in plants around the world.

Alternative vehicle fuels and natural gas vehicles NVGs are another hot topic that has the potential to impact the energy industry. Yet, it is the question of a lack of infrastructure that will hinder the development of NGVs. Also, other vehicle fuelling methods are expensive when it comes to conversion of cars and purchasing.

Finally, the visions for the development of unconventional fossil fuels could and most likely will raise issues for the energy industry. More money is needed to explore other potential sources. Also, global exports and imports are in the process of changing due to the US and its unconventional resources. This is affecting the global dynamics of the whole oil and gas market and the change will need policy reform which can take time and may cause more problems in short term.

Written by Claira Lloyd.

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