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The Natural Gas Revolution: To the Brink of Innovation

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Robert W. Kolb reveals how new gas resources are transforming the global energy industry, redistributing economic and geopolitical power in stunning ways.
This chapter is from the book

World Energy—A Rapid Tour of the Past 200 Years

From the beginning of human history until about 1750, a common date for the start of the Industrial Revolution, the world was poor, and societies were equal—or at least very roughly so, and dramatically so compared to the state of the world today.1 Over the past 250 years, some nations have succeeded in building economic institutions and deploying technological innovations to facilitate economic growth. These movements have been the primary drivers of a rapid increase in wealth that was initially concentrated in the United Kingdom and soon spread to other early-moving nations. More recently, other societies have adopted institutions and technologies that permit economic progress, and wealth has spread to many other nations. The original Industrial Revolution has been superseded by further industrial and societal revolutions.

Some historians emphasize the role of the rapid technological changes that occurred starting about 1750, while others emphasize what they see as the greater importance of improving institutions that guarantee property rights and propel economic growth.2 Whatever the ultimate cause of the prosperity that began some 250 years ago, the world’s new wealth arrived on a drip, then a trickle, and finally a flood of energy derived from hydrocarbons. Pre-industrial societies consumed relatively little energy, deriving virtually all energy from organic sources. These sources were either human or animal muscle power, or substances that were burned for energy, like wood and peat. Before about 1700, power derived from wind, water, and hydrocarbons played only a negligible or nonexistent role.3 No matter the sophistication of intellect or the brilliant organization of society, a total reliance on these organic energy sources placed an upper bound on human consumption and wealth, so the almost universal condition of poverty “did not arise from lack of personal freedom, from discrimination, or from the nature of the political or legal system, though it might be aggravated by such factors. It sprang from the nature of organic economies.”4

Only the past few centuries have seen a significant increase in energy use. The increased exploitation of new energy sources has paralleled the development of technologies that have been able to actually make productive use of that newfound energy. Without industrial technologies, new energy sources could only be used for heating, and the difficulty of accessing new energy supplies has helped to limit human energy consumption.

The new sources of power that accompanied and made possible the rise of industrial technologies were first coal and then oil. Table 1.1 and Figure 1.1 show the transition of the world’s energy sources since 1800, when the Industrial Revolution was already in full swing.

Table 1.1. The Transition of World Energy Usage from the Nineteenth to Twentieth Centuries

Fuel Transition

Decade

Coal overtakes biofuels

First decade of the nineteenth century

Oil overtakes biofuels

1950s

Oil overtakes coal

1960s

Gas overtakes biofuels

1960s

Figure 1.1

Figure 1.1. The Succession of Energy Sources: Biofuels, Coal, and Crude Oil

Source: Adapted from Vaclav Smil, Energy Transitions: History, Requirements, Prospects, Oxford, UK: Praeger, 2010, p. 154.

In Figure 1.1, the different sources of energy are expressed in a common unit of energy, the energy contained in 1 million barrels of oil. Perhaps most surprisingly, the entire nineteenth century, with all its rapid technological change and innovation, was still dominantly fueled by organic energy sources—non-petroleum resources including wood, peat, and the muscle power of animals and humans. Coal, however, gained an ever-more-prominent role starting in the middle of the nineteenth century. Nonetheless, coal surpassed organic energy as a world energy source only at the beginning of the twentieth century. Oil surpassed organic energy sources in world usage only in the 1950s, and it did not surpass coal until the 1960s.

Coal’s slow move to ascendancy over organic energy sources stemmed from the relatively slow spread of the Industrial Revolution to other parts of the world. Only northern Europe and the United States saw rapid industrialization following the breakthroughs in the United Kingdom. In these advanced economies, coal was king, supplying more than 90% of all of England’s energy as early as the 1850s.5 Meanwhile, though it was relatively close to the source of innovation, Italy had a distribution of energy sources in the 1850s much like England’s in the 1550s.6

Figure 1.2 shows that the past 200 years of energy history has featured a falling share for organic energy sources, and that trend continues to the present, with biofuels now constituting less than 10% of world energy usage. Nuclear and hydropower are together even less important than biofuels, constituting slightly more than 8% of total world energy usage. Solar power and wind power are both too slight to be factors. Thus, the world currently relies on hydrocarbons—coal, oil, and natural gas—for more than 80% of energy. Focusing on energy derived just from the three main hydrocarbons, oil provides 37%, slightly leading coal at 35%, with natural gas following at 28%. However, the importance of gas is rising and even accelerating. Natural gas supplied 7% of the world’s energy in 1950, and it supplies 23% today; its proportion is almost certain to increase.

Figure 1.2

Figure 1.2. Shares of World Energy Sources, 1800–2008

Source: Adapted from Vaclav Smil, Energy Transitions: History, Requirements, Prospects, Oxford, UK: Praeger, 2010, p. 154.

That natural gas has gone from a 7% to a 23% share of total world energy in 60 years is all the more impressive when measured against the vast acceleration of world energy usage, as Figure 1.3 shows. In 2008, world energy usage was 10 times as large as in 1900 and 22 times as large as in 1800. Only a relatively small part of this increased energy usage can be attributed to population growth. Rather, there has been a marked increase in energy usage per capita, which has fueled a dramatic increase in per capita gross domestic product (GDP) as well. From 1820 to today, world per capita GDP has risen by a factor of 10, while in the industrialized West, per capita income has surged by a factor of 20 over the same period.7

Figure 1.3

Figure 1.3. The World’s Energy Sources, 1800–2008

Source: Adapted from Vaclav Smil, Energy Transitions: History, Requirements, Prospects, Oxford, UK: Praeger, 2010, p. 154.

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