Without a lot of warning, diesel has become the universal solution for the world economy.
Power outage? India’s industries and middle class fired up their diesel generators. Drought? India halved the price of diesel so big farmers could pump more water. India refers to this as the “dieselization of the economy.”
India is not alone: In Nigeria, 90 percent of industrial electricity users own diesel generators as insurance against frequent blackouts. As government-run power grids falter, African customers are buying 100,000 generators a year. In China, in 2010, power outages led so many companies to turn on their generators that a diesel shortage left a Chongqing crematorium with bodies backing up.
If you have a construction boom, a power outage, a drought, a tsunami; if you need transportation, water, heat, or electricity: the answer these days is diesel.
For many years in the U.S., diesel was gasoline’s low-priced, industrial cousin, used largely for trucking and industry. But diesel’s growing role as insurance and as a “bridge” fuel has solidified into a global diesel economy, increasing the price in the U.S. so much so that it’s often more expensive than gasoline.
While the rapid dieselization of the global economy has all sorts of implications for prices, pollution, and politics, it also suggests there’s considerable room for revolution on the margins of the world’s power grids. In the wake of increasingly volatile weather, renewable electricity and fuels could take diesel’s place to function as the cheaper, cleaner insurance and bridge.
Diesel’s globalization first became apparent to me in April 2008, when a drought in Chile shut down hydroelectric dams. The country’s copper mines shifted to diesel generators, which increased diesel prices here. Since that time, the U.S. has become a major exporter of diesel to Mexico and South America, and many U.S. refineries have re-engineered their processes to increase diesel production—and decrease that of gasoline.
For the first time since World War II, the U.S. is a significant exporter of refined petroleum, which has tied the prices American consumers pay for gasoline to the world markets. Essentially, the dieselization of the global economy means that U.S. consumers are now shopping for diesel in a global market, and paying higher prices than when refineries sometimes oversupplied the American market and prices fell. (As I’ve written elsewhere, this is why people who claim building Keystone Pipeline will lower US oil prices are probably wrong; refined oil from Keystone will command global prices because the purely domestic market no longer exists.)
Diesel’s ability to save the day when the lights go off brings some dangers. For one, the pollution from diesel can be considerable. In June, the World Health Organization listed diesel’s exhaust as a carcinogen and cause of lung cancer. And it will be difficult to cut diesel use because it’s been driven partly by generous government subsidies. India, for example, will spend $9 billion subsidizing diesel this year, which critics point out mostly benefits the well-off, who can afford generators and water pumps. And subsidies don’t always work to reduce prices once dependency is established. Shortages of subsidized diesel in China in 2010 gave rise to black markets charging 150 percent of the regulated rate.
But the quick ascendance of diesel suggests something hopeful: the energy system is mutable, and within years, not decades. Central power plants, highways, and railroads take decades to develop. But around the edges of the energy grid—where the diesel generators are—energy sources and equipment can be more rapidly switched out. And with diesel’s price now determined globally, and tied specifically to water and electricity crises, high or at least volatile prices are likely. That means that replacing diesel—either with another multipurpose liquid fuel, or with an alternative electrical generator like solar—could make bigger and faster inroads at the margins of the world’s electrical grids than, say, trying to replace coal-fired generators or gasoline-based cars. The island of Tokelau, a territory of New Zealand, has replaced its expensive diesel generators with solar panels and backup generators running on locally produced coconut oil.
And, the U.S.military has done something similar in Afghanistan, where the price of delivering a gallon of gasoline to the front lines can be as high as $400 and a security nightmare, to boot.
Perhaps diesel can be used to build a better bridge to a better fuel.
