Awakening occurs slowly. In the first few days after the outbreak of the war in Iran, politicians discussed rising fuel prices, but now it is becoming clear that numerous secondary products from oil and gas production are becoming scarce, from artificial fertilizer for agriculture to helium for chip production.
The energy crisis is developing into a real raw materials crisis, and markets react as markets react: scarce goods become more expensive, and the feared shortage is enough to make up for it long before the physical shortage occurs. In such a situation, catastrophe scenarios are just as popular as attempts to politically dampen the resulting price shocks for consumers and companies.
Crises promote innovation
Even if this were successful, such market interventions could prove harmful. A look at economic history shows that shortages lead to innovations that not only restore pre-crisis levels, but also enable new growth.
The steam engine was not invented to start an industrial revolution. Rather, the British Empire suffered from a severe energy and raw materials crisis in the 17th century. The trigger was the lack of wood as a result of continued clear-cutting, seemingly irreplaceable as a building material and as an energy source. In order to get coal out of the ground instead, the tunnels had to be constantly drained, which was initially done with oxen and even man power – until Thomas Savery introduced the machine that he himself sold as “The Miner’s Friend” and which was later commercialized in a more efficient form by James Watt.
The oil crises of the 1970s also led to innovations, particularly in engine construction. At the beginning of the decade, consumption of twelve liters of fuel was still commonplace, even for a medium-sized car, but within a decade it was possible to reduce this by around a third. Electronic fuel injection played a major role in this, although it had already been invented but was now becoming attractive to many car manufacturers.
What is remarkable about this development is that the savings engines prevailed in the long term, even though the price shocks only occurred in the short term. In 1979, premium gasoline cost an average of 1.02 German marks per liter, which would be 1.42 euros in today’s purchasing power. In 1970, adjusted for purchasing power, it was only five cents less.
The decisive factor is the costs
Similar developments are conceivable for most of the currently scarce raw materials. The fact that ammonia as a raw material for fertilizers is obtained from reformed natural gas is simply due to the fact that this has been the cheapest way to date. Technically it is possible to produce ammonia from water and air alone. If the electricity required for this comes from nuclear, solar or wind energy, it also serves to protect the climate. It has been proven that it can be implemented on a large scale, but the costs alone have not yet been competitive.
In order for the toxic and volatile ammonia to become usable fertilizer, it must be further processed, for example into urea. For this purpose, carbon dioxide previously separated from industrial plants would have to be used; a waste material that had to be disposed of would become a raw material. Furthermore, the need for fertilizer can be significantly reduced with the help of AI-controlled agricultural machinery – an important development trend in agricultural technology. But high-tech in the field is not worth it where fertilizers are subsidized
Interventions harm future growth
When looking for new paths, even gifted engineers cannot avoid physics, which is why the substitution of helium is a particularly difficult case. No other material allows cooling systems that work close to absolute zero and thus enable particularly low-loss electricity transport. And yet: research into high-temperature superconductors has been going on for a long time, but commercialization has so far failed due to high costs.
Innovation processes triggered by price shocks are rarely linear. It is more likely that upheavals will occur, as a result of which companies or entire industries will go under, and even economically highly developed states will disappear into insignificance. In this respect, it is all too understandable when politicians try to protect what has been achieved by intervening in the pricing of scarce goods. But in doing so, they reduce the chances of those actors who rely on innovation. Such an approach also has its price: the foregoing of future growth.
