Hamish McRae: Could the hurricane's legacy be the beginning of the end of the oil age?

Higher price petrol will reinforce in subtle ways the trend for people to move back into towns
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The Independent Online

Great disasters, be they natural or man-made, usually have a lasting effect when they reinforce trends that are already in place. Otherwise they become just another disaster - horrible but not something that changes the world. The lasting legacy of Hurricane Katrina may well be the changes it provokes in global energy use. If so, it will be seen as signalling the beginning of the end of the oil age.

The scale of the general economic damage is still unclear, as indeed is the political damage and the sad human toll. But what is already clear is that it has made what was already a tight global oil market even tighter. The world was already operating with a wafer-thin margin between supply and demand. Knocking out up to a quarter of US oil production, at least for some weeks, has eliminated that margin. There are strategic reserves, including EU reserves, and using these will keep the lights on for the time being. But the underlying problem remains.

The world has never been in this situation before. All previous oil crises were caused by deliberate restrictions on supply by Opec. Yes, oil prices have been this high in real terms, higher in fact in the early 1980s, but then they fell back as the prices temporarily cut demand and supply increased. Now demand may fall back a bit, but not for long. It is being driven relentlessly upwards by the growth of the Asian economies, particularly China but also India.

Meanwhile, supply cannot suddenly increase. Every producer, with the possible exception of Saudi Arabia, is running flat out. Iraq might eventually return to full production, but that would not help hugely. The US itself is pumping less each year; the North Sea is in steady decline, though the UK is still a net exporter of oil. There is a hot debate about the point at which global oil production will peak and the decline begin - some geologists believe we are close to that now - but there is no escaping the harsh fact that oil supplies are finite. At some stage the oil age must draw to its end.

There is no need to be apocalyptic about this: to declare that Western civilisation will end. Oil will not run out suddenly. Substitutes will be developed, with crops being grown for fuel: bio-diesel and ethanol look winners in the medium-term.

The key point is that the world is at the start of something new, just as it was a century ago when two oil-using technologies were first developed. Henry Ford introduced the mass production of the car, and the Wright brothers invented the aircraft. The first heralded the spread of suburbia; the second shrank the world. Katrina is a trigger for change. By bringing forward a step-change in oil prices, it will push the world faster towards whatever that "something new" might be.

And what is that? There are some clues, certainly about energy conservation. Take the car and suburban sprawl. The city of Copenhagen recently made a survey of shopping habits of people in the central district. It found that people who had travelled to the centre by public transport or by bicycle spent much more in the shops than people who had travelled in by car. This was not just a question of spending the petrol and parking money on something else; even people buying expensive products were more likely not to have come by car.

Copenhagen is interesting because, more than any city on earth, it has succeeded in taming the car. The professor of urban design who has master-minded this programme, Jan Gehl, has become the great high priest of urban planning. His company has been helping cities all around the world: here in the UK, Ken Livingstone has hired it in London, and it is doing a small scheme in Brighton. In Copenhagen at least, these ideas have had considerable success, creating a much more lived-in and successful city than it was a generation ago.

The key idea is that if you can persuade people to walk or use bikes, cites become much more efficient as well as nicer places to be. For the old in particular - and all Western societies are ageing fast - the high densities of cities have big advantages over low-density suburbs. If you cannot drive and live in a suburb, you are dependent on others to help you do the most basic things, like shopping.

Higher-price petrol won't of itself reverse the trek of young middle-class families to the suburbs. People like space, and cities have to run themselves much better if they are to offset the fact that they will always be more crowded. But it will, in subtle ways, reinforce the trend for people who don't need so much space to move back into towns and spend their money on books and bars instead of petrol.

Take another trend: home working. The office is not suddenly going to disappear. Those predictions of a decade ago that we would all work from home, pecking away at our laptops, have like so many of those visions proved over-enthusiastic. But there has been some shift, and the higher cost of travel will reinforce it. As companies turn more and more to part-timers and the semi-retired to offset the decline in the size of the workforce, so the attraction of not paying people to come into the office will increase. Employers don't care where people are - if they did, they would not outsource so much to Bangalore. What they care about is paying to get a job done in the simplest and cheapest way, and paying people to move about makes no sense if it can be avoided.

Those are just two existing trends that will be reinforced by more expensive energy and in particular more expensive oil. There are many others, many obvious ones such as the increasing fuel efficiency of vehicles, improving the insulation of homes and restricting unnecessary packaging. There is no magic wand; but it is not hard to see ways in which energy could be saved without serious negative effects on our still-comfortable lifestyles. We are economic animals. Higher-priced energy nudges us all towards being more thoughtful about the amount we need to use.

Conservation alone, however, won't fix the energy crisis. The most interesting question surely is which of the many technologies around will be the ones that best substitute for oil. In the 1950s, the answer would have been nuclear power. It has proved very disappointing. But with the oil price eventually topping $100 a barrel all sorts of technologies that were deemed too expensive will suddenly look attractive.

My guess is that we will patch our existing oil-based economy by finding ways of producing oil substitutes, such as bio-diesel, for a while, until something entirely new comes along. That entirely new technology may already exist in some lab somewhere or other. For it to see the light of day needs two things. One is the technical advances to give it practical application; the other a higher oil price that will help the economics. Katrina, with all its devastation, has certainly helped on that latter front.

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