No, oil won’t take us to Canaan

Monday June 19 2017

By BITANGE NDEMO
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There is a Wall Street adage that says, “No tree grows to the sky.” The quote implies that growth of traded shares has a limit.

This adage is also true for non-renewable sources of energy like oil. This resource will never be extracted in eternity.

Like trees, its growth is not endless. The future of non-renewable energy therefore, is bleak.

We must think beyond the excitement of the discovery of fossil fuels in our country and continue to diversify the economy for sustainable growth.

Although oil remains the world’s leading fuel, accounting for 33 per cent of global energy consumption, demand is slowing down.

The June 2016 BP Statistical Review of World Energysays, global coal consumption fell by 1.8 per cent in 2015, well below the 10-year average annual growth of 2.1 per cent.

Renewable energy is growing and becoming cheaper. After the Paris Accord, the world is generally in agreement that climate change is a major problem and we each must work towards the reduction of greenhouse gas emission levels.

DECLINING ENERGY CONSUMPTION

BP chief executive Bob Dudley says in the annual review:

“On the demand side, we are seeing a gradual deceleration in global energy consumption as the huge boost from globalization and Chinese industrialization slowly subsides. That slowing was compounded last year by continuing weakness in the global economy. As a result, global primary energy consumption grew by just 1.0% in 2015, similar to the rate of growth seen in 2014, but much slower than the average seen over the past decade. Much of this weakness was driven by China, where energy consumption grew at its slowest rate in almost 20 years. Even so, China remained the world’s largest growth market for energy for a fifteenth consecutive year.”

The demand for fossil fuels will continue to plummet as nations begin to ensure that the Paris Accord holds.

Many countries, including Kenya, are banning plastic products whose raw material is fossil fuels.

Large consumers of fossil fuels like China and India are closing coal-powered plants in favour of green energy-driven sources like wind, geothermal and solar.

Inside Climate Newsreports that “twice as many Americans now work in the wind industry as in coal mining, and solar employs many more, but the U.S. still trails the EU and is far behind China.”

EMERGING TECHNOLOGIES

Close to nine million people now work in renewable-energy jobs. The renewable energy drive is now like a moving train that is unstoppable until it matures and prices drop below non-renewable sources of energy.

Technology, too, is advancing. A recent article in the World Weekly, titled "A new low-cost CO2 splitter could lead to a green energy breakthrough", reveals that we are closer to mass-producing renewable energy.
The process, the article says, “is carbon-neutral and efficient, using a low-cost copper catalyst in a process driven by solar power.”
Advances in lithium-sulfur batteries offer greater promise for electric cars. Several manufacturers already produce all-electric models, further complicating demand for oil.

In Kenya, M-Kopa has made it possible for the poor to cheaply access clean energy in place of paraffin.

In the absence of the electricity grid, we now have cheaper, reliable and more efficient small-scale renewable energy that in the not too distant future will disrupt established electricity providers and leapfrog poor people out of darkness.

Success of small-scale providers will certainly add to the pain of continued suppression of demand.

Emerging technologies and fear of climate change, too, will further lower demand and force the price of oil to remain low or simply fall below the cost of production.

DIMINISHING CHARM OF OIL

The difficult part is the heightened and unrealistic citizen expectations based on past observations of oil-producing countries.

Countries like Venezuela, although having large oil reserves, are enveloped in chaos and are dependent on the single commodity.

In Africa, Nigerians are embroiled in internecine war in the oil-rich Niger delta. South Sudan too has predicated its growth on oil but has never seen peace.

Angola is equally in a mess after oil-leveraged heavy borrowing from China went awry. The country has lost its sovereignty, with China taking up its resources, including its priced farmlands.

We have failed to inform citizens that oil has lost its charm. Perhaps that is why Kenya’s oil-rich Turkana County is becoming increasingly belligerent, as local people are yet to appreciate the diminishing importance of the commodity.

Wallowing in Dickensian great expectations, leaders think that there is conspiracy to sideline them from the wealth that comes with oil.

Yet it is the same leaders we need to encourage the citizens to exploit other opportunities that have greater promise.

Although the writing is indeed on the wall, the discourse nationally and in counties is that oil will take us to Canaan.

Somehow we need to dissuade our people that oil will never take us to the Promised Land.

MISLEADING EXPECTATIONS

There are people in Turkana who may be thinking that God finally heard their prayers and answered them with oil fortunes.

This will be misleading and perhaps we need to temper the expectations.

It is even more likely that we may never productively produce oil in Kenya, not because the commodity isn’t there but because advances in technology will have depressed its demand.

It is better to see the other resources that Turkana has. These include its searing sunshine, underground aquifers, expansive land resources and exceptional quality beef and goat meat.

The people already have the passion in ranching but lack the knowledge on the supply chain to access global markets.

It is said that every cloud has a silver lining and in this case, there is indeed a silver lining as oil prices continue to decelerate.

Nigeria, one of the African countries that were dependent on oil, has begun to diversify the economy.

At some point, the country abandoned every aspect of the economy as oil money poured in. They imported everything, including toilet paper.
They have learnt a lesson and today, Nigerian companies have begun to creatively use local materials.

They now talk about agribusiness putting more investments into growing sugarcane, rice and palm oil.

DIVERSIFIED ECONOMIES

In essence, they have rediscovered that land is a factor of production and as a result, the country is easing foreign currency restrictions to entice investors. With increased production, unemployment will lessen.

Other oil-dependent countries like Angola should learn from Nigeria and begin to use their abundant resource – land and other renewable energy – and build a diversified economy.

With the amount of land and renewable-energy sources Africa enjoys, the Paris Accord was meant to benefit Africa.

That Europe will stop producing food in winter to reduce greenhouse gas emissions translates to Africa becoming a major food exporter to Europe and the Middle East.

African nations will not be the only ones changing focus from oil to building more diversified economies.

This change is already taking place in the Middle East, led by the Emirates and other Gulf nations.

Their strategy is to move from oil dependence to more diversified economies.

EXPLOITABLE OPPORTUNITIES

Kenya’s Vision 2030 and the United Nations’ Sustainable Development Goals both cover every exploitable opportunity the country can offer.
We need to be simplifying these documents and disseminating the message to the citizens.

Only then will people eventually see opportunities beyond fossil fuels. At the moment, all hopes are mistakenly focused on using the just discovered non-renewable resource to better our lives.

It is a fact: fossil fuels are not sexy anymore. They help increase greenhouse gas emissions that damage our environment.

This has led to climate change that has impacted virtually everybody. If we fail to stop it, the world will be disrupted by extreme weather patterns and all of us will be in danger.

Stopping the use of fossil fuels is a small price to pay to achieve sustainable life on earth.

The writer is an associate professor at the University of Nairobi’s School of Business.