High oil prices will support search for alternative fuel technologies

20Oct04

Adrian Binks, Managing Director of Argus Media, and someone I knew years ago from OPEC meetings and oil market jamborees, argues cogently in the FT that, unlike previous supply-driven oil market crises, the current problem is one of demand, citing (as I did earlier) the strong demand from China. Although he speaks of the need for a painful adjustment by the world economy to the longer-term higher price of oil, it seems reasonable to speculate that (necessity being the mother of invention) higher oil prices will accelerate the development of alternative energy forms. There are some doubters that information technology is the great leap forward that it appears to us now, but there is no doubt that it is a great facilitator, and should enable scientists and engineers in their quests for engineering and technology solutions to the fuel crisis, provided the potential returns are attractive enough.

Compared with previous crises, a demand driven crisis may well persist for longer. This increases the prospect that major investments in alternatives to petroleum, such as hydrogen fuel cells, will deliver a larger return and sooner, so encouraging their backers.

IT seems to be bogged down these days in an excess of communication and information, particularly and dangerously at the consumer level. It has probably also drawn a disproportionate amount of investment, much of which has created huge overcapacity and waste. I am personally attracted to the idea that a real technological breakthrough that has a stronger physical impact, as opposed to the virtual impact of the Internet, will be much more transformational.

IT, and our inability to distinguish good information from bad is making us more stupid, at the same time as making us feel smarter. If the fuel crisis delivers a new technological outcome, we might indeed see something more tangible and genuinely distracting than computer games, text messaging and endless reams of mediocre content and communication.

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