'The oil price crisis will never go away'

A former programme coordinator at Ricardo Energy and Environment in the United Kingdom, energy expert Nazrul Islam has been the managing director of Infrastructure Investment Facilitation Company (IIFC) under the Economic Relations Division of the Bangladesh government for 16 years.

Over the course of his illustrious career, he has worked as an energy planning expert in Rarotonga of the Cook Islands; research fellow of biomass and environment at the East-West Centre in at Honolulu, Hawaii, USA; and group manager of project development at DesignPower in Wellington, New Zealand.

The Business Standard recently interviewed him for his insights on the world beyond oil.

TBS: The oil market has been volatile since April. How long could the oil market take to recover fully? And, would it fully recover at all?

NI: To get to your answer, let me travel back in time first.

There are three kinds of fossil fuels – coal, oil, and gas. The use of coal kick-started the industrial revolution 250 years ago. After that, oil replaced coal.

Then oil was phased out and was replaced by gas. And now, the gas is also going to be phased out soon. We are now entering the era of renewable energy.

So, we can see a transition here. These are energy sources. And there is another thing at play here – the energy conversion devices. If we talk about oil, there are two types of conversion devices – one is stationary which does not move or is not shifted to places. We can see this kind of device at the power generation plants or stations.

Another type of conversion device is the mobile one that are used in transportations.

Earlier, it was coal. For example, we could take the trains that use coal or steam engines. Then when oil replaced coal, we could see the diesel engine trains. And now, there are electric trains. It is the same train, operated with different fuels and different energy. 

At present, oil is mostly used in mobile/movable form rather than the stationary ones. Since gas is quite tough to be adapted for trains, it took a direct transition to electricity. But for the long routes, it is obviously not easy to sustain a continuous supply of electricity.

So, oil is still the main form of energy here. That means oil is the concentrated energy.   

Energy sources transform as nations develop and these become more convenient. So, there is an energy transformation, and I believe that over the next 20 to 30 years, we will see the transformation of oil as well. 

If you follow the statistics of Bangladesh Petroleum Corporation, there are several oil-fuelled stationary power plants in the country. But these will be phased out because they are very expensive. So the government will not prefer them for a very long time.

Their advantage is short lead time, which means electricity plants can be constructed very quickly. If there is a shortage of electricity somewhere, it can be transferred from such plants. But it is very costly. So, these oil-based power plants are now used in peak load times. 

You will see that over the next 10 years, oil demand will decrease in our country, at least in power stations.

Then comes the discussion of oil's use in transportation. The government allowed CNG stations almost 20 years ago. Before that, transportation could only use oil.

So, we saw a massive conversion from oil to gas. Almost 95 to 98 percent of cars and other transports were converted to gas. And similarly, 20 years from now, we may see that gas will be replaced by electric vehicles.

There is a reason for this. Whether it is oil engine or gas engine, they emit smoke and fume that contain carbon-dioxide (CO2), deadly carbon monoxide (CO), and other hydrocarbons that are severely bad for our health and environment.

And that is not the only thing. These engines are internal combustion ones that take oxygen from the air. We human beings take oxygen too. This means we are competing with the engines for the same oxygen.

Now, think about the cities. There is a limited amount of oxygen in the city. The population of the city is almost 15 to 20 million. We take oxygen and exhale CO2. These gasoline engines do the same.

On top of that, these engines are emitting gases and fumes that are deadly for our health. So, these oil and gas combustion engines will be converted to electric motors, and motors will need batteries to run. And then, these transports will be called Electric Vehicles (EV).

So, the combustion engines will have to go, and we will turn to non-combustion engines or devices which have electric motors. Electric motors will also lead to combustion pollution  at the power stations, but the pollution is far less than that of the mobile gasoline-based combustion engines.

It is now obvious that the present oil price crisis will not go away. The oil price will not recover. And eventually, oil will go away

The point of saying all this, is that it is now obvious that the present oil price crisis will not go away. The oil price will not recover. And eventually, oil will go away.

TBS: The world still has a huge reserve of oil. Despite that, why is "post-oil world" at the centre of attention? How does a world without oil look like?

NI: As per my knowledge, at the present consumption rate, we have roughly 45 years of oil. Oil reserve depends on consumption rate. If the consumption rate goes down, we have more years of oil. If it goes up, then there are less years of reserve.

Now, as I just mentioned earlier, oil consumption has to go down within cities. The transportation industry will switch over to electricity because both mobile combustion engines and humans are fighting for the same air. So, they have to go away.

Now, when the use of oil drops, its consumption rate will slow down. Consequently, oil will comparatively stay for more years.

The world beyond oil will absolutely be better considering pollution. The post-oil world will be more battery-operated. Cars will be identical in look to those of today. They might be a little bit smaller, but will be noiseless because electricity is soundless.

The vehicles will have a smooth start, and will stop smoothly too. There will be fewer mechanical parts, which means less visits to workshops for engine issues because electric engines are more efficient.

You and I will move to the same places but the car will be driven by electricity instead of a combustion engine.

TBS: What could be the alternatives to oil? How long could it actually take the world to shift from oil to its alternatives?

NI: Even in our country, oil is already going out. Now, we have switched to gas. Eventually, that, too, will go away to vacate the place for battery. So, electricity is the future.

However, it may take 20 to 30 years for that transformation towards a world beyond oil.

Now, when it comes to producing electricity, there will be bigger and more power stations, but they will be far away from the cities. It is better to have a centralised power plant system instead of allowing thousands of mobile combustion engines to run in the city. This will help lower the pollution level.

However, there will be questions about what those power stations will run on. Suppose even if we run them by coal or oil, it will be possible to control pollution by placing them outside the city and using stationary, large-sized pollution control devices.

TBS: What does a post-oil world mean for the geopolitics of the Middle East? Who would suffer most if the world runs out of oil?   

NI: Let me get to the second part of your question first. The first and foremost damage of the post-oil world will be felt by the high-cost-producing countries. For example, Venezuela and Canada are very high-cost producers. When global oil demand will peak and fall away, these countries are likely to go out of business.

Now, the low-cost oil producers, such as the countries in the Middle East, will somehow stay in business when the oil price hits an abyss. This is because they have a very low production cost. So, they can afford to cut the oil price and stay in business, unlike Canada and Venezuela, until the global demand for oil totally runs out.

Let me get back to the first part of your question with a simple answer. When the economy of a country is impacted, there will be various other geopolitical repercussions.

TBS: Considering the impact of the current oil crisis and a possible post-oil world trajectory on the economies of the Middle Eastern countries - which are the main destinations of our migrant workers - how could Bangladesh prepare for that future?

NI: A lot of Bangladeshis went to the Middle East to work in development projects over the last 40 years. In the 80s, many of my colleagues went to the Middle Eastern countries like Libya, Iraq etc. to work in infrastructure sectors, such as construction of roads and power plants.

Many of the Middle Eastern countries, apart from the ones destroyed in wars, have already developed their infrastructures. Now, they are in production phase. Consequently, our highly educated groups of engineers no longer go to the Middle East. The region is now the destination of our low-skilled or unskilled migrant workers.

Ultimately, considering the post-oil world and its impacts, we need to increase the skills of our migrant workers.  

At present, we have many big development projects going on in our country. Back in the 80s, the high-skilled people went to the Middle East because we did not have such projects here.

In consideration of the ongoing big projects in our country – for example, power plants, roads and ports – the impact of the post-oil world will not be that severe on us if we plan accordingly by utilising our own manpower in these projects.

But sadly, our projects are full of foreign people. We spend millions of dollars on foreign workers and technicians every year. This is because we do not have our own skilled workers and technicians. If we can train our people properly, the foreign workers can be replaced with local ones.

We need to upskill our labour force. I strongly believe this is absolutely vital. It is true that we are providing some necessary training, but that is not enough. We need to accelerate.