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Page added on February 27, 2007

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Balancing Act: Reducing Oil Dependence Without Triggering A Global Crisis

Three facts underscore the importance of the debate about the future of oil: oil is a finite resource; oil is one of the major anthropogenic sources of carbon dioxide; and the world economy is heavily dependent on oil, especially in the transportation sector. The most important questions are: How do we balance depletion, the environment, and economic growth

The main threat to sustainability of energy supplies is not a terrorist attack on energy facilities or the imposition of an oil embargo by an oil producing country. These are short-term events that can be dealt with quickly and effectively through various measures that include the use of the Strategic Petroleum Reserve, increase in production, and diversion of oil shipments.

The main threat to sustainability of energy supplies in the medium term is the mismatch between investment in additional capacity and energy infrastructure on one hand and the growth in demand for energy on the other. One of the most plausible scenarios is a relative decline in investment in additional production capacity in the oil-producing countries in response to calls by governments and politicians around the world to reduce or even eliminate dependence on oil. An energy crisis in this case is unavoidable if those who call for eliminating dependence on oil fail to provide a replacement in a timely manner. Most of the efforts to replace oil are not market driven and heavily subsidized. Most likely such efforts will fail to replace oil within a reasonable time. They cannot sustain the pressure of markets in the long run.

MEES



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