A big challenge going ahead is going to both availability of energy and its cost. The world is still quite dependent on oil. Geopolitical and other factors are signalling the end of the era of cheap oil. National Geographic has an excellent story:

You wouldn’t know it from the hulking SUVs and traffic-clogged freeways of the United States, but we’re in the twilight of plentiful oil. There’s no global shortage yet; far from it. The world can still produce so much crude that the current price of about $30 for a 42-gallon barrel would plummet if the Organization of the Petroleum Exporting Countries (OPEC) did not limit production. This abundance of oil means, for now, that oil is cheap. In the United States, where gasoline taxes average 43 cents a gallon (instead of dollars, as in Europe and Japan), a gallon of gasoline can be cheaper than a bottle of watermaking it too cheap for most people to bother conserving. While oil demand is up everywhere, the U.S. remains the king of consumers, slurping up a quarter of the world’s oilabout three gallons a person every dayeven though it has just 5 percent of the population.

Yet as the Enterprise drillers know, slaking the world’s oil thirst is harder than it used to be. The old sources can’t be counted on anymore. On land the lower 48 states of the U.S. are tapped out, producing less than half the oil they did at their peak in 1970. Production from the North Slope of Alaska and the North Sea of Europe, burgeoning oil regions 20 years ago, is in decline. Unrest in Venezuela and Nigeria threatens the flow of oil. The Middle East remains the mother lode of crude, but war and instability underscore the perils of depending on that region.

And so oil companies are searching for new supplies and braving high costs, both human and economic. Making gambles like Thunder Horse and venturing into West Africa and Russia, they are still finding oil in quantities to gladden a Hummer owner’s heart. But in the end the quest for more cheap oil will prove a losing game: Not just because oil consumption imposes severe costs on the environment, health, and taxpayers, but also because the world’s oil addiction is hastening a day of reckoning.

Humanity’s way of life is on a collision course with geologywith the stark fact that the Earth holds a finite supply of oil. The flood of crude from fields around the world will ultimately top out, then dwindle. It could be 5 years from now or 30: No one knows for sure, and geologists and economists are embroiled in debate about just when the “oil peak” will be upon us. But few doubt that it is coming. “In our lifetime,” says economist Robert K. Kaufmann of Boston University, who is 46, “we will have to deal with a peak in the supply of cheap oil.”

Business Week writes that as oil touches $40 a barrel, “oil and gas companies finally are hiking exploration and production budgets.”

As regards to alternatives, there are no clear alternatives. Solar and wind energy still are quite expensive, while Scientific American has some doubts on the Hydrogen Economy.

India urgently needs to look at its energy plicy and make significant investments in alternative sources of energy. As India develops, the need for energy is going to increase. We better be looking at alternatives to oil – $40/barrel or more is not something we will be able to afford easily.

Also read: Jeff Nolan’s post on oil and the possible alternatives.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.