Oil field management All Over the World - Case Study Example

OIL AND ENERGY CRISIS by Why have the widespread adoption of energy conservation and the development of alternative energy sources proved so difficult to achieve? There are many reasons as to why widespread adoption of energy conservation and the development of alternative energy sources proved so difficult to achieve. First, the finite nature of this resource necessitates a user cost that gives rise to the Hotelling theorem. The overall effect is that increased interest rates discourage rapid depletion of the finite resource (Mouawad, 2007). Governments, as the (principal) resource owners, also do gain rents from the resources; funding a majority of their social objectives on this derived income. Market externalities or imperfections, as well as the inelastic demand of fossil fuels further influence the prevailing contexts present. The above are but some of the few reasons why there has been limited adoption of energy conservation. The huge amounts of income, derived as petro-dollars, do significantly contribute to various state-entities’ economic survival (ElBaradei, 2013). Figure 1: World oil discovery by year This affects the limited nature of alternative energy resource development taking place globally. The continued rate of global industrialization, which necessitates increased consumption of energy resources, especially oil and natural gas has been a factor of concern because conservation would pose a threat to continued industrialization. Another important factor is that alternative energy resources, though significantly advantageous than the more prominent fossil fuels, are unfortunately very expensive to develop. In addition is the factor of global application and viability, as none of the potential alternatives can at the current contexts, be exploited effectively to warrant a change from oil and natural gas utility (Leggett, 2001). The case scenario above is further impacted by the fact that there is a hold/ control of this sector. Source: EIA This is mainly by global multinationals, which are majorly Western-based and capitalistic in nature. These firms, are powerful actors in the prevailing international relations, and hence contribute to the slow pace of change. This is influenced by the fact that major revenues are gained, not only by these firm-entities, but also by their mother-nations, which are all powerful actors in the global arena. Consumerism, which as a phenomenon has been founded on en masse production of goods and service provision, further fuels the need for oil utility, in the production of various crucial products. The underlying global industrial base is thus, the main driver of fossil fuel consumption; significantly influenced by the global industrial output and human advancement (Heinberg & Leich, 2010). The best means of conserving energy or finding alternative energy can be done through renewal energy. However, the main problems facing renewable energy revolve around issues of commercialization and cost scalability. The legal ramifications in both environmental and political terms are also issues that prevent the realization of such an initiative. Despite the fact that there are advancements in renewable energy technologies that promise to achieve conservation of energy, it is still difficult because of several factors including economical, technical and political issues. The establishment of important aspects such as micro-grids, storage and the development of a truly smart grid are technical and major setbacks. Implementation of such an initiative also depends on policy issues that raise questions such as whether renewable energy can be produced without ruining the environment especially in developing countries. The biggest problem could be lack of political good will to implement energy conservation initiatives especially those touching on natural resources because there are different stakeholders who hold key political decision-making responsibility in such a matter. Lack of political goodwill among such stakeholders has made it difficult to realize energy conservation or finding alternative energy sources. The Merits/ Demerits of a Free Market Approach The free market approach is majorly based on Adam Smith’s assertion that prevailing market forces/ dynamics do have a significant role-play, in balancing the various variables present. This is with regard to mineral and human resources, products and service provision. These forces do have an effect on motivating both consumers and the firms involved. In terms of energy resources and commodities, there is an effect on their supply, transportation, conversion and utility, in addition to residual disposal. This is influenced by the demand and supply aspects, which in a free market approach, would balance out. This is as influenced by the invisible hand of market forces. Because of uncertainty about climate change, and human contributions, a free market approach will focus on precautionary measures in the reduction of the risk to global warming. These measures will work as an insurance against the risks posed by a factor such as climate change. A free market approach will involve removing regulatory barriers to innovative ideas. For example, many environmental regulations currently under implementation create obstacles to the development and implementation of emission-reducing energy-saving technologies. Thus, these regulatory barriers must be removed to enable formulation of energy conservation strategies (Golove, 1996). Another way would be to eliminate energy subsidies put by governments to disrupt energy market and investment in energy conservation without offsetting returns. Therefore, energy subsidies should be eliminated to allow a more efficient energy sector to flourish. Other ways will include deregulating electricity and transportation markets. Government utility regulation and local electricity monopolies prevent innovation in the energy sector. This is similar to regulations in transport market that encourages the increase in greenhouse gas emissions and prevent cost-effective and energy efficient strategies. These approaches will help in the conservation of energy and in finding alternative energy sources. A demerit would be the fact that market forces are not always efficient, in terms of balancing the demand and supply curves; all other factors considered. This is due to the very nature of contemporary global trade and commerce. Different nations have their strengths, in terms of resource allocation and thus, such an approach would be biased disproportionately towards the resource rich states (Deffeyes, 2005). To be noted is that even in these select nations, the wealth accumulated would not benefit the nations wholesomely, but rather a few select individuals and firm-entities. Government Interventions: Merits and/ or Demerits Because energy supply projects are fundamentally large scale, capital intensive and long leading lives, the supply and demand aspects lead to various locks in decision-making. This may be for many decades, due to the very volatile nature of energy prices. Such aspects do have fundamental influence on the economic output of all nation-states globally. This is hence one of the core reasons why there is need for government intervention. The rates gain, resources utilized and impacts felt, do require governments to intervene, either directly or indirectly through various pertinent agencies (Hudson, 2007). This necessitates focus on aspects such as analysis of market and opportunity costs and cost analysis. The aspect of dealing with issues of resource allocation, resource scarcity, marginal analysis and allocative efficiency amongst others is also essential. Because oil as a natural resource is found in a few nation-states, government intervention is further needed in terms of both the oil exporting and importing entities. A demerit would be that government intervention always brings about a lot of bureaucracy, additional costs, variable conditions and limitations (Sheila, 2008). This is especially due to the political nature of changes within governments and geo-political influences such as countries laying ownership over oil rich areas and political relationships between countries. Government intervention will entail passing regulations to various industries that produce and consume energy especially those that consume a lot of energy. For instance, governments should pass regulations that reduce green house gas emission and encourage efficient use of energy. For example, governments could regulate the airline industries to allow free flight that reduces energy used per flight by 17 percent. Such regulations will ensure that energy is conserved. In the United States of America, for instance, must reform its energy regime. The main source of green house gases that contribute to climate change is the electrical energy systems in the country. The US must then enact environmental laws and give government incentives to make the transition into renewable sources. In comparison to conventional energy resources such as oil, renewable energy resources are generally environmental friendly and benefit the environment and the economy. However, the market mechanism has failed to operate in terms of a specific energy market. Therefore, the government must ensure that market mechanisms work to promote the use of renewable energy. The government must work hand-in-hand with business organizations in the market to ensure that they use renewable energy more. Governments must also sponsor technological innovations and researches that seek to find efficient energy conservation strategies and alternative energy sources with funding to enable such innovations and researches are of help in the push towards efficient use and conservation of energy. This can be done through research competitions, offers such as call for paid for research papers on energy conservation and research, talent and technological rewards for those who aid in the conservation of energy or invention of resources that help to tap renewable energy from various sources or conserve energy. Another most important aspect would be for the government to develop renewable energy plants that tap and produce renewable energy in commercial portions to reduce the overreliance on natural resources. This will help in energy conservation in a major way. Conclusion Due to the very delicate nature of environmental balance in the wake of enhanced human development, there is need for a rethink of the global strategy with regard to resource utility. This is especially true in the case of oil, which being a non-renewable fossil fuel, pollutes the environment significantly vis-à-vis the great importance they hold in contemporary society. While our energy needs continue to grow/ expand, so is the dependence on oil, which if not carefully considered, may result in an earlier, globally devastating oil peak. Not only are human lives, the environment, global trade and commerce, geo-political tranquility on the line, but the entire human civilization, as we know (Greer, 2013). Reference List Cantor, NF 1993, The Civilization of the Middle Ages: The Life and death of a Civilization. Harper Collins. Deffeyes, KS 2005, Beyond Oil: The View from Hubberts Peak. Hill and Wang. ElBaradei, M 2013, Tackling the Global Energy Crisis. IAEA (International Atomic Energy Agency – Bulletin: Vol. 50-1), retrieved from: http://www.iaea.org/Publications/Magazines/Bulletin/Bull501/Energy_Crisis.html Greer, J M 2013. Not the Future We Ordered: The Psychology of Peak Oil and the Myth of Eternal Progress. Karnac Books. Golove, W. (1996). Energy Efficiency, the Free Market and Rationales for Government Intervention. In Deregulation of energy: intersecting business, economics, and policy: conference proceedings, 17th annual North American Conference, October 27-30 1996, Boston Park Plaza Hotel and Towers, Boston, Massachusetts (p. 135). The Associations. Heinberg, R. & Leich, D. (2010). The Post Carbon Reader: Managing the 21st Century Sustainability Crisis. Watershed Media. Hudson, P. (2007). Government Intervention In the Energy Efficient Home Marketplace (Doctoral dissertation, Western Michigan University). Leggett, JK 2001, The Carbon War: Global Warming and the End of the Oil Era. Routledge. Mouawad, J 2007, Rising Demand for Oil Provokes New Energy Crisis. The New York Times, retrieved from: http://www.nytimes.com/2007/11/09/business/worldbusiness/09oil.html?pagewanted=all&_r=0 Sheila, N S 2008, The Final Energy Crisis: A study of energy trends, prospects, assets and liabilities in different political systems and regions. London, Pluto Press. Zehner, O 2012, Green Illusions. Lincoln and London: University of Nebraska Press. Read More