The Gasbased Economy

Use of methane or a liquid derivative of methane, such as methyl alcohol, as fuels in the place of oil-based fuels would provide for a dramatic reduction in unwelcome byproducts of combustion. Use of methane or methanol as one of a mix of fuels would undoubtedly be environmentally positive (Saricks, 1989). Although the primary focus of economists dealing with fuels has tended to focus on the bottom-line cost of production, transport and end-user cost of fuels, the awareness that environmental concerns and external costs may have to be factored into the fuel cost equation, may cause revision of the present conclusion that oil-based fuels are preferable to methane or one of its derivatives. A strong case can be made that a large number of hidden subsidies support the current low price of oil-based fuels (Hubbard, 1991). For instance, is the deployment of U.S. forces in the Persian Gulf area accountable as a petroleum subsidy?

A number of states in the United States, principally California, New York, and Wisconsin, have already enacted legislation requiring some external costs to be taken into account when proposing new energy generating activities. Fuller external accounting that include costs to society, economies, transportation infrastructure, environment, health, etc., rather than the bottomline oil company accounting, all tend to favor gas over oil-based fuels. Bringing market prices in line with energy's hidden costs will be one of the great challenges of the coming decades.

Even with no disruptions of petroleum supply to the World economy, the economic energy base will shift from oil to gas in the course of the next quarter century or so. This shift will be dictated by nothing more than the limited amounts of petroleum liquids, tar sands, oil shales, etc. that are available. However, geopolitical considerations, such as significant perturbation of the oil flow from major producing regions like the Mid-East, and environmental considerations that concern emissions from combustion, may force an earlier transition to the gas economy than could be predicted from an analysis of energy cost economics alone. Thus, the shift from oil to gas as the primary non-nuclear source of power is a matter of concern today, and not an obscure energy concern, the exploitation of which will be indefinitely pushed into the future.

What will energy prices be in the near future? We do not know. If there are no disruptions to society or energy supply, it is likely that an inexpensive energy supply will continue to be the industrial base world-wide. No one really knows how competitive any particular type of hydrocarbon is going to be over the coming 10-20 years on a purely commercial basis. How will development of hydrate affect the energy industry? Developing hydrate as a source of methane will undoubtedly stabilize the availability of low-cost energy. It is likely that permafrost hydrate is probably close to being a commercial methane source now, even within North America.

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