Raw materials shortages – An inevitable source of conflict

Economic, political and social consequences

It could scarcely have been a more topical subject for the evening, the dispute between Russian and Ukraine over gas supplies at the start of the new year showing how quickly energy conflicts can escalate. The second dialogue forum in the series on resources, which took place on 20 January 2009, examined the effects that shortages of raw materials can have, and how best to deal with the impact of dwindling resources.

Raw materials shortages have many different aspects. Apart from the economic consequences, the social dimensions should not be overlooked. Dirk Reinhard, Deputy Chairman of the Munich Re Foundation, noted on the one hand that a large percentage of the world’s population could not afford expensive raw materials. On the other hand, mankind and nature were deprived of their means of subsistence when, for example, rainforests were cut down to make room for biofuel crops.

Prof. Claudia Kemfert (Head of the Energy, Traffic and Environment Department of the German Institute for Economic Research, Berlin): “Burning oil is such a waste because it is also a raw material used to manufacture essential products”. According to the latest International Energy Agency study, production will peak no later than 2030 due to ongoing depletion of the oil fields. Kemfert illustrated the scale of the problem: “It would take three new Saudi Arabias to ensure oil supplies were extended still further”. By contrast coal, which was harmful to the climate, would be in plentiful supply for the next 200 years.

Although energy demand has slowed due to the economic crisis, the effect will be short-lived because countries like China and India have some catching-up to do. Moreover, plummeting crude prices have halted a number of exploration projects in recent months. Kemfert concluded: “If we wait for oil prices to go up again, it might be too late, and shortages can soon arise”. It was also vital that money be invested in researching and developing alternative fuels, and in insulating buildings.

High prices are not a panacea for dealing with shortages of raw materials. A high oil price is bad news both for the economy and for climate protection, because more coal is used, in liquefaction and gasification for instance. Kemfert: “Price increases cost the German economy around €19bn in the first half of 2008”. She called for a far-sighted energy mix. “We can’t switch energy systems overnight.” It takes around 40 years to research the technology and build the infrastructure. We must therefore avoid the energy crisis, before spiralling prices signal an impending shortage.

Prof. Johannes Müller SJ, who teaches at the Institute for Social and Development Studies at the Munich School of Philosophy, is concerned that raw materials could cause another Cold War, natural capital being indispensable to our survival. “Energy is a fundamental requirement for growth, and necessary to tackle poverty.” He noted, for instance, that adequate energy supplies were needed if UN Millennium Development Goals were to be met.

However, conflicts arise if people have different views as to how resources should be used, or if raw materials grow scarce. Moreover, there is always a danger that conflicts will flare up over allocation due to the arbitrary regional distribution of strategically important resources. Size was an advantage, the bigger countries carrying greater negotiating weight. Müller warned that we should not overlook the possibility of primary disputes over resources provoking secondary conflicts on issues such as environmental migration.

“The solution does not just lie in high prices, because the bulk of the burden is then shifted to the poor.” He argued the case for making affordable energy accessible to developing countries. Huge ethical problems arise if governments increase the price of resources. This leads to unrest, and has a destabilising effect.

He nevertheless believes that raw materials shortages can be beneficial to cooperation, potentially leading to a global deal on sustainability. For instance, Indonesia’s energy supplies could be made more sustainable if demand were satisfied by increased use of its geothermal resources and reduced reliance on coal-fired power. However, this requires investment on a scale that the country cannot afford unaided. “In their own interests, the industrial countries must help Indonesia exploit energy extracted from the depths of the earth.”

Müller felt it was important in general to persuade the developing countries not to follow the same energy path as the industrial countries. “The next ten to 15 years will be crucial to energy use in the next 50.”

The road to sustainable energy is also strewn with obstacles because market prices do not reflect actual shortages. Kemfert: “This is a matter for the politicians”. The economy cannot solve the problems single-handedly. She cited Germany’s Renewable Energy Sources Act and Europe’s 20/20/20 target as successful examples of political initiatives. The latter aims, by 2020, to reduce overall emissions to at least 20% below 1990 levels, to increase the share of renewables in energy use to 20%, and to increase energy efficiency by 20%.

Müller believes dwindling resources will force the politicians to act. He accused the industrial nations of applying double standards: “Reality won’t conform to our wishes, the earth is finite”. Whilst Indonesia has introduced swingeing energy price hikes in recent years, despite the profound effect this has on the poor, we often claim we cannot afford to take similar action. “I think we can do more; whether we want to is another matter.”

But there is still a long way to go. Firstly, due to short-termism, we often fail to invest sensibly, and secondly too little heed is paid to the interrelationships involved. Müller: “Although the tropical rainforests are vital to the climate, trees are cut down to grow biofuels”. Müller sees insulating buildings to improve energy efficiency, and different forms of mobility as major opportunities in the short-term. “We will be forced to pursue this course because, in the long term, other countries will insist on their emission allowances.”

Renewable energies, Kemfert believes, will come into their own only from the mid-21st century onwards. Fossil fuels will thus remain significant, and Germany’s dependency on gas will increase. But how safe are our supplies? Kemfert believes the utility companies are not equipped to cope with lengthy interruptions to supplies. Russia’s hold on gas supplies will increase if the planned Baltic pipeline goes ahead. The politicians have no ready answers. There are no alternatives in sight because of “stability issues where potential suppliers such as Iran or Azerbaijan are concerned”. Liquefied natural gas terminals, already operating in Japan, might be one possible solution.

Moderator Dr. Patrick Illinger wondered about the ethical issues involved if countries like Ecuador demanded compensation from the industrial countries for conserving its rainforest, under which vast oil reserves lie dormant. Müller: “In principle, the claim is justified”. After all, the country is sacrificing potential oil income in the interests of the global community. “We need a global convention, of the kind envisaged by the UN’s Rio de Janeiro climate conference in 1992.” The road ahead is far from smooth, and will only be passable if every country stands to gain.

Is there some chance we will successfully make the transition to a sustainable world before catastrophe strikes? Kemfert: “It will require a huge effort, but it can be done”. We know, after all, where we should be heading. But we would have to change course in some areas, and identify the opportunities. Müller was also confident: “I lived for many years in Southeast Asia, and saw how people deal with problems. That gives me optimism”.

The next Resources Dialogue Forum, “The future of abundance – Can the planet still feed us?” takes place on Tuesday, 17 February 2009, beginning at 7 p.m.

20 January 2009