by Luis de Sousa
Sat Apr 10th, 2010 at 02:26:43 AM EST
Last night I was preparing a slide show for a seminar on the Transition Movement
, where I'm supposed to present the current state of affairs on the Energy front. To get some macro data on the EU I went digging for the SER-2
documentation and happened to notice something very interesting: there is a very distinctive hallmark to the Energy Mix of the PIIGS (the Atlantic - Portugal and Ireland - and Mediterranean - Italy, Greece and Spain - states that run persistent budget deficits).
Suprising? Perhaps not, but it explains a lot, and it also highlights that the present crisis is not solely about finance, possibly more about energy than anything else.
front-paged by afew
The following graphic presents the percentage of Oil used by each state in their total Energy Mix. I'm excluding Malta and Cyprus, for their exceptional islander status and Luxembourg for its also exceptional geographic size and placing.
In orange, all lined up to the left, are found the PIIGS, the most Oil reliant states in the Union. Coincidence? Certainly not. The riddle is now understanding if they are PIIGS due to their Oil reliance or are Oil reliant because they are PIIGS.
There are only 4 other states above the EU average, all in central Europe: Austria, the Netherlands, Belgium and Denmark. Even Oil producing states have better energy mixes: Denmark - a net oil exporter - is just a notch above the average, the UK - a self-sufficient state - is even below average. Taken as a whole, the BeNeLux would get close the PIIGS, but this is also an Oil producing region.
At the other end of the scale are found the sates the EU inherited from Warsaw. These newcomers appear with balanced Energy Mixes, more reliant on indigenous sources such as Coal and Nuclear. This is an immediate explanation for some of today's problems: the recent expansion to the East exposed the PIIGS to competitors with similar or cheaper labour costs but with much more competitive economies, more reliant on indigenous energy sources and insulated from price volatility. During the period between 2004 and 2008, when oil prices more than quadrupled, the PIIGS where the more vulnerable states of the EU, enduring higher impacts on discretionary spending and household budgets in general.
Without having hard numbers, this reliance on Oil is mainly due to the Transport sector, given that all the PIIGS have been modernizing their Electricity infrastructure and consolidating balanced energy mixes there. The PIIGS are possibly more reliant on road transport than average, something stemming from geographic location, inappropriate Urban Planning or both. There are also structural reasons for this, PIIGS are maritime states, where industries like Fishing have considerable weight in the Economy. These maritime industries are fully reliant on Oil and present policies even incentive that dependence with fuel tax cuts. Another important observation is that the PIIGS are today largely stripped of heavy industries, where Natural Gas or Nuclear, for instance, could be employed to balance the Energy Mix.
Are persistent budget deficits a result of this dependence? Do these states need more stimulating measures on the Economy in times of high Oil prices? Has this reliance prevented modernization in certain sectors? Has it fostered the outsourcing of certain industries? One thing is certain, for them economic recovery will be harder than for the rest.
These observations also show where the PIIGS have to work to become competitive economies. Energy Policy cannot target solely the Electricity sector, a serious Programme is needed to reform - revolutionize - the Transport Sector. Road transport has to be re-equated at large: either true alternatives to the present internal combustion engine show up or it simply has to be phased out. Starting with freight (where the impact on daily life is minimal), governments could concentrate on promoting rail and maritime modes, instead of putting up ever more tax and toll cuts to hauliers. PIIGS have also to reconsider their Industrial fabric, that may be too leaning on the Service sector. The Manufacturing Industry has to regain its proper role, perhaps taking advantage of business opportunities in alternative energy and efficiency, and together with Agriculture, increase the overall value per freight-km travelled.