ARTICLE IN PRESS

Energy Policy 36 (2008) 522–530

www.elsevier.com/locate/enpol

A hydrogen economy and its impact on the world as we know it

Stephen Blanchette Jr.
4500 Fifth Avenue, Pittsburgh, PA 15213, USA
Received 3 July 2007; accepted 26 September 2007
Available online 7 November 2007

Abstract

An assortment of governmental, technological, environmental, and economic factors has combined to spur renewed interest in
alternatives to petroleum, and especially in hydrogen. While there is no clear consensus on the viability of the technology, governments
and corporations alike have vigorous hydrogen research programs. The result is that hydrogen may stand on the verge of becoming a
true successor to oil. A transition from oil to hydrogen would alter familiar global economic and political structures in profound ways.
The ramifications will influence developed and developing nations, oil importers, and exporters alike. New alliances among governments,
corporations, and other groups may challenge existing notions of governance. Although a hydrogen-based economy may be decades
away, the vision for it requires near- and mid-term thinking to manage the transition smoothly. Further, hydrogen is only a metaphor;
any change from the current oil economy will entail dramatic changes to the global status quo that must be planned for now.
r 2007 Elsevier Ltd. All rights reserved.

Keywords: Hydrogen; Oil economy; Alternative energy

1. Introduction fundamental change in its evolution. The oil economy that

Depending upon whom you believe, hydrogen is destined
either to save the world or to disappoint it. As an
alternative fuel option, hydrogen is attractive because it
promises negligible environmental impacts compared with
burning petroleum products. It also is the most abundant
element in the universe, so there are no scarcity concerns.
Yet, there are still open questions about the maturity of the
technology, debate over the viability of the concept given
current infrastructural limitations, and an overall lack of
clairvoyance about when a hydrogen-fueled future will
arrive. To be sure, hydrogen is not the only promising
alternative energy option. Ethanol, liquid fuel from natural
gas or coal, and even ‘‘old’’ alternatives like solar, wind,
and nuclear are showing remarkable potential. Yet,
hydrogen has an undeniable high-tech appeal for a world
conditioned to expect new technology approaches to its
problems.
The seriousness with which hydrogen is being considered
as an alternative to oil suggests that civilization is nearing a
Tel.: +1 412 268 6275; fax: +1 412 268 5758.
E-mail address: sblanchette@acm.org
emerged in the early twentieth century built empires and
altered the class structures of the time profoundly. A shift
away from that economic base could have equally
substantial impacts. A world no longer bound to non-
renewable petroleum products for energy could bring with
it enormous, perhaps unprecedented, global impacts.
In this paper, I consider the possible economic and
geopolitical ramifications of a global economy driven by
hydrogen, rather than oil, as the primary fuel. Rather than
argue for hydrogen, my assumption is that it, likely in
combination with other alternative energy sources, will
come to the fore within the first half of the twenty-first
century. Given that emergence, I try to understand the
global repercussions. In so doing, I review the circum-
stances that are driving the current interest in alternative
energy sources and, although this is not a technical paper,
spend some time discussing a few of the relevant technical
points regarding hydrogen as a fuel to provide the reader
with a basic background to support the rest of the
discussion.
Some will object to focusing on hydrogen as the savior of
the world’s energy future for a number of valid reasons
(Keith and Farrell, 2003; Anthrop, 2004; Romm, 2004;

0301-4215/$ - see front matter r 2007 Elsevier Ltd. All rights reserved.
doi:10.1016/j.enpol.2007.09.029
 ARTICLE IN PRESS
S. Blanchette Jr. / Energy Policy 36 (2008) 522–530
Hammerschlag and Mazza, 2005). The objections are
beside the point; it is a certainty that oil is running out.
If for no other reason, alternatives, no matter how
impractical or economically unpleasant, will be the future.
Further, the reader should understand that hydrogen is
only a metaphor; any combination of alternative energy
sources that breaks the world’s fossil fuel addiction will
have serious consequences for the international status quo.
2. The oil economy
In his ‘‘State of the Union’’ address to Congress in
January 2003, United States (US) President George W.
Bush declared, ‘‘Ourygoal is to promote energy indepen-
dence for our country’’ (Bush, 2003). A large part of the
plan for energy independence rests on hydrogen. Some 4
years later, the US Department of Energy still invests
significantly in its hydrogen power program (US Depart-
ments of Energy and Transportation, 2006). Before looking
at the hydrogen future, let us look back at how we arrived
at this historical turning point.
2.1. Historically, a broken market
For more than half of the twentieth century, the ‘‘Seven
Sisters,’’ an oligopoly of Western oil companies, controlled
the international oil system. The Sisters were able to press
their advantage over foreign governments for the control of
oil supplies at a time when the governments of oil-rich
nations were not very knowledgeable about oil’s prospects.
In time, however, those countries achieved parity in both
their knowledge of oil and their ability to produce it
without assistance. This increased independence led to
dissatisfaction with Western interference in the oil market
(in the form of protectionist quotas) and pushed several oil
producers to form the Organization of Petroleum Export-
ing Countries (OPEC), which by 1970 controlled 85% of
global oil exports (Spero and Hart, 2003).
Once OPEC gained the ability to influence oil supplies
and prices, developed nations’ thirst for oil ushered in a
transformation to traditional notions of international
power. The OPEC nations, commonly thought of as less
developed countries (LDCs), were essentially able to
dictate oil price terms to the developed world through
manipulation of supplies. OPEC’s exercise of its newfound
power led to the energy crisis of the 1970s and caused a
dramatic redistribution of wealth from the global North to
the global South (Roberts, 2004).
OPEC’s success was short-lived, however. In the 1980s,
high oil prices triggered widespread recession and caused
demand reductions as consumers turned to oil substitutes
(coal, natural gas, and nuclear power) and as energy
conservation policies in Europe, Japan, and the US took
hold (Roberts, 2004; Spero and Hart, 2003). At the same
time, non-OPEC suppliers exploited the high price of oil by
increasing production (Roberts, 2004).
523
Diminished demand and increased supply combined to
break OPEC’s pricing power, causing its members to
renege on cartel agreements in an effort to regain market
share. The new glut of oil triggered a price collapse that
undermined producers closely allied to the US, forcing US
diplomatic intervention in the oil markets (Roberts, 2004).
Interference on all sides has long been a hallmark of the
global oil market.
2.2. Oil and geopolitics
Beyond merely demonstrating the broken nature of the
oil market, the above discussion illustrates how much the
oil economy influences world politics (and vice versa).
Events of the last 20 years continue to underscore that
influence.
For instance, the Persian Gulf War of 1991 and the
events leading up to it were firmly centered on oil. The
original dispute between Iraq and Kuwait involved
Kuwait’s increased oil production (to lower prices) as a
means to keep Iraq cash-strapped after its war with Iran.
Iraq responded by invading Kuwait and taking over
Kuwaiti oil production. That invasion prompted real fear,
among oil producers and consumers alike, that Iraq would
continue to march into Saudi Arabia and, in so doing, gain
control of close to one-fifth of the world oil supply
(Roberts, 2004). Hence, the broad-based coalition war to
push Iraq out of Kuwait.
Some claim that the current hostilities in Iraq also are
oil-motivated. According to Roberts (2004), Operation
Iraqi Freedom (OIF) goes far beyond simply securing oil
production; rather, the campaign is part of a strategy to
secure US supremacy in the world by eliminating the
biggest threat to it (absent a peer competitor), namely,
volatility of oil prices. Vijay Vaitheeswaran (2003), how-
ever, challenges that view, noting that OIF is unlikely to
have any real stabilizing effect on oil prices in the
foreseeable future. Indeed, steep spikes in oil prices in
2006 and 2007 seem to support Vaitheeswaran’s view.
Regardless of one’s position, however, the oil game
obviously is one of high-stakes at the international level.
3. The impetus for change
One might reasonably wonder why non-fossil fuels were
not pursued more seriously during the energy crisis of the
1970s. The reason, simply, is that the changing market
conditions of the 1980s effectively snuffed out serious
consideration of alternative energy sources (Roberts,
2004). As discussed earlier, the combination of increased
production and altered usage patterns reversed spiking oil
prices. For the better part of the decade, the problem, for
all intents and purposes, went away.
Even renewed concerns about oil in recent years might
seem to have been temporary. When gasoline prices spiked
to record levels in the summer of 2006, television
advertisements in the US for E85 ethanol-based vehicles
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524 S. Blanchette Jr. / Energy Policy 36 (2008) 522–530
and hybrid electric cars ran virtually non-stop on every
channel likely to have viewers of driving age. As soon as
gas prices ebbed toward the end of the year, those ads
vanished. Yet, US farmers still expect to plant more corn in
2007 than at any time since the end of World War II,
principally to meet surging demand for ethanol (US
Department of Agriculture, 2007). Thus, the quest for
viable alternatives to oil has continued, although perhaps
not in the forefront of the public’s mind. Indeed, the
interest in alternative energy and, in particular, hydrogen
at the dawning of the twenty-first century is unlikely to
abate as in the past, and the reasons are several.
First, as already discussed, the oil trade is anything but a
free, liberal market. Artificial cartel manipulation of
supplies and prices, as well as governmental intervention
(both diplomatically and militarily), ensure that the oil
market does not obey market forces. In a word, the oil
market is broken.
Second, the economic boom of the 1990s brought with it
surging demand for oil (Roberts, 2004), and forecasts for
future demand show no signs of slackening. In the US, the
Energy Information Administration estimates domestic
energy consumption will rise from 98 quadrillion British
Thermal Units (BTUs) in 2002 to 136 quadrillion BTUs by
2025, which translates to an increase in oil demand from 20
to 28 million barrels per day (Abraham, 2004). Globally,
energy consumption is growing at about 2% per year and is
projected to double by 2035 and triple by 2055 (Friedmann
and Homer-Dixon, 2004), with the developing world leading
the spike in demand (Jaffe, 2004).
The growth of India and China, with their enormous
populations, is particularly worrisome. According to Lee
Raymond, former chairman of ExxonMobil, ‘‘The 8
percent annual growth in oil demand from developing
countries was easy to meet when those economies were
smaller,’’ but that growth rate will not scale well as those
economies continue to enlarge (Vaitheeswaran, 2003). For
that reason alone, the quest for real alternatives to oil will
inevitably intensify, and not just in the short term. The
explosive growth experienced by China, for example, will
force it to seek energy alternatives in order to sustain that
growth and drive the country’s increasing pre-eminence in
world affairs.
Access to energy is not simply a concern of nations on a
significant growth path, however. As many as two billion
of the world’s roughly six billion inhabitants rely on
primitive energy sources, including wood, straw, and even
animal dung (Detchon, 2003; Friedmann and Homer-
Dixon, 2004). They also spend a disproportionate share of
time and economic resources to acquire energy when
compared with the more developed world (Detchon, 2003).
One cannot expect to make appreciable gains against world
poverty nor hope for continued developing-world growth
under such conditions.
Third, environmental concerns, especially in relation to
energy, have become more central to international debates
(Hoffmann, 2002). Burning hydrocarbon fuels such as
gasoline is dirty business. Doing so contributes to smog
and elevated levels of particulate matter in the air. It
increases ground-level ozone, contributing to the difficul-
ties experienced by individuals with breathing problems
(unlike naturally occurring stratospheric ozone, which
provides the earth with a layer of protection from the
sun’s ultraviolet rays). Burning gasoline and other petro-
leum products also produces carbon monoxide, which is
poisonous to humans, and carbon dioxide, which does not
support respiration (CaFCP, 2007).
While pollution stemming from fossil fuel combustion
has been a well-known problem for decades, an additional
concern has arisen more recently. Both carbon monoxide
and carbon dioxide are greenhouse gases (CaFCP, 2007).
Greenhouse gases are thought to trap heat in the Earth’s
atmosphere, causing gradual increases in global average
temperatures. This climate change phenomenon, popularly
referred to as global warming, in turn is being linked to a
host of unpleasant, widespread environmental calamities
such as droughts, crop failures, rising seas, and shrinking
fresh water supplies, among others (Friedmann and
Homer-Dixon, 2004).
Simply burning fuel is not the sole culprit in greenhouse
gas emissions; producing the fuel to be burned is another
source of greenhouse gases (CaFCP, 2007). Further, the
problem of greenhouse gas emissions is amplified by the
burgeoning economies of developing countries like China
and India. If just those two countries were to continue to
feed their growing energy needs through oil and coal, the
rest of the world could switch to clean energy sources with
no net positive effect on global warming (Vaitheeswaran,
2003).
Fourth, as in the 1970s, there is anxiety about oil
supplies. Concerns today, however, are not over supplies
temporarily tightened through manipulation, as was the
case in the 1970s. Rather, the worry is over absolute
supply. Peak oil production is expected to be reached in the
first half of the twenty-first century. The fear is that peak
production, coupled with continued increases in demand,
will cause real oil supplies to fall off sharply rather than
gradually decline (Roberts, 2004).
Note that there is no consensus on when peak produc-
tion will occur, owing to the difficulty in knowing how
much oil is actually left in the world (Roberts, 2004). In
fact, the numbers are all over the map. Some claim the
world production peak is as far off as 2030 or 2035
(Roberts, 2004); others say it could happen as soon as 2010
(Romm, 2004). The peak in non-OPEC production,
forecast for 2015, is especially concerning as it will
mean increasing dependence on OPEC supplies thereafter
(Roberts, 2004). The prospect of the last accessible oil supplies
on the planet under OPEC control is highly undesirable.
Fifth, with a renewed dependence on OPEC in sight,
energy security has become a major concern. Increasing
instability in the Middle East over the past two decades or
so has only served to exacerbate volatility in both the price
and supply of oil worldwide. Additionally, Middle Eastern
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S. Blanchette Jr. / Energy Policy 36 (2008) 522–530
oil and politics are not the only security concern.
According to a report by the US National Intelligence
Council, ‘‘many of the areas—the Caspian Sea, Venezuela,
West Africa and South China Sea—being counted on to
provide increased [energy] output involve substantial
political or economic risk’’ (National Intelligence Council,
2004).
Indeed, of all the motivational factors, security concerns
seem to be the true driving force for real change. The
September 11, 2001 terrorists may have unwittingly set off
a chain reaction beyond their expectations. They may have
convinced the world that Middle Eastern oil (and even oil
in general) is too risky and unreliable for its ever-growing
energy needs. Thus, while oil embargoes in the 1970s
started people talking about alternative energy, the 2001
terror attacks spurred people to action. That is what is
different about the current quest for hydrogen power and
other alternative energy options—as much as anything else,
it is a quest for security.
4. Hydrogen technology and challenges
David Hart, of the Imperial College Centre for Energy
Policy and Technology, observing the difficulties of the oil
economy, concludes, ‘‘There is only one common thread
running through these, and that is hydrogeny. That is
why even the major oil companies are predicting that the
energy future is hydrogen’’ (Hoffmann, 2002).
4.1. Why hydrogen?
Hydrogen has caught the imagination of decision
makers, automobile manufacturers, and even oil compa-
nies for a variety of reasons. For one thing, hydrogen can
be derived from all current forms of power generation,
including fossil fuels, nuclear power, and renewable sources
such as solar and wind (US Department of Energy, 2004).
Researchers are investigating other methods of producing
hydrogen too. The ability to generate hydrogen from a
variety of sources provides a derivative benefit as well. It
lessens the likelihood that a hydrogen cartel, à la OPEC,
will develop (Hoffmann, 2002). Thus, hydrogen may
eventually lead to a truly market-based energy economy.
In addition, hydrogen is the most abundant element in
nature (Roberts, 2004), so the global supply is theoretically
inexhaustible. Unlike oil, its occurrence is not dependent
on geological happenstance. Further, the ability to
generate it from a variety of methods suggests that all
states might one day be able to produce significant
quantities domestically. Thus, the potential exists for
hydrogen to conquer today’s petroleum supply and
demand problems, while also providing secure, reliable
access to all.
Lastly, hydrogen is environmentally friendly. It can be
burned in a modified internal-combustion engine with only
trace amounts of oxidized engine lubricants as emissions. If
burned in a fuel cell, harmful emissions are eliminated.
525
Furthermore, fuel cells produce no carbon dioxide
(Hoffmann, 2002), eliminating them as a source of that
greenhouse gas. Indeed, except for small amounts of heat,
the fuel cell’s only other byproduct is water (Garman,
2004). Relatively recent advances in technologies asso-
ciated with hydrogen production and fuel cells have
provided cause to believe that the remaining hurdles can
be resolved within the span of a few decades (Romm,
2004).
4.2. How hydrogen works
First, hydrogen is not really an energy source in itself; it
is an energy carrier (Garman, 2004). Although the most
abundant element known, it is bound up in compounds
such as water, natural gas, oil, coal, and many others.
Thus, it takes energy to break down those compounds and
produce hydrogen (Roberts, 2004). However, once pro-
duced, it can be stored and transported to where it is
needed (Hoffmann, 2002). For example, if produced
through solar or wind power, hydrogen can, in effect,
carry the energy of the sun or the wind to power a car or
building on a cloudy, calm day.
Fuel cells are the way one makes hydrogen surrender the
energy it is carrying. A common grade school science
experiment, electrolysis, takes water and separates it into
its constituent elements (oxygen and hydrogen) by passing
an electric current through it. The hydrogen fuel cell does
the opposite; it synthesizes water through the combination
of hydrogen fuel and oxygen from the air, releasing
electricity in the process. Automobiles using fuel cell
technology emit no pollutants or greenhouse gases
(CaFCP, 2007). While it may sound too good to be true,
the basic science of hydrogen chemistry has been under-
stood since the early 1800s (Romm, 2004). The difficulty
has been in translating that chemistry into a commercially
viable energy system.
4.3. Barriers
Several things are needed for such a commercially viable
energy system. Chief among these is a means of hydrogen
production. Although hydrogen can be produced by a
number of means, each of those production techniques has
issues associated with it. For instance, making hydrogen
from fossil fuels is relatively inexpensive but has the
drawback of continuing to send mass quantities of carbon
dioxide into the atmosphere—unless those emissions are
captured and stored, a technology whose viability is still in
question (Keith and Farrell, 2003).
Production of hydrogen from nuclear power plants also
is a possibility. Nuclear power plants are poised for a
comeback in the US, but are only ever one accident away
from being shunned once more by the public. The
enormous construction costs of plants and the problem
of where to put nuclear waste remain thorny problems as
well (Economist, 2007). Deriving hydrogen from renewable
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526 S. Blanchette Jr. / Energy Policy 36 (2008) 522–530
energy sources such as solar and wind is the most
promising technique, but the renewables suffer from a
combination of significant conversion inefficiencies in
producing hydrogen, high capital outlay to construct
plants, or intermittent power availability (Lipman, 2004;
Anthrop, 2004).
Once hydrogen is produced, there are issues with its
distribution and storage. Distribution costs are estimated
to be as much as five times the cost of hydrogen production
(Sperling and Ogden, 2004). This cost argues strongly
for production facilities to be as close as possible to
dispensing centers (i.e., distributed production), at least
until demand rises sufficiently to justify more centralized
facilities (Lipman, 2004). The final solution to distribution
and storage problems likely will vary over time as well as
by geography (Sperling and Ogden, 2004).
Finally, even if all production and distribution problems
are solved, hydrogen fuel cells still must advance to the
point where they provide storage capacity and range
comparable to current gasoline engines in order to be
commercially viable, a point perhaps a decade or more into
the future (Romm, 2004).
5. Effects on international economics
Assuming the barriers are overcome, it makes sense to
consider the potential global economic impacts of a
transition to hydrogen, as they could be quite dramatic.
The reason is scale; a look at the numbers is illustrative.
According to a 2004 Memorandum to the President
jointly issued by the National Security Advisor, the
Director of the National Economic Council, and the
Director of the Office of Science and Technology Policy,
the modern world uses about 14 terawatts (or 14 trillion
watts) of primary energy, three quarters of which generates
greenhouse gases. By 2050, energy consumption is esti-
mated to rise to 35 terawatts. To maintain carbon dioxide
emissions at 550 parts per million (a planning figured used
by the European Union that is roughly twice pre-industrial
levels), zero-carbon energy supply would have to exceed all
forms of energy currently available (Victor, 2004).
The implication of those figures is that hydrogen power
must be implemented in a big way just to achieve some
small advance against global warming. Consequently, the
plan for hydrogen is big, whether explicitly to address
global warming or not. The US Department of Energy
speaks of a ‘‘hydrogen economy’’—fundamentally different
from the world we know today—where domestically
produced hydrogen carries energy to all sectors of the
economy (US Department of Energy, 2002a). European
and Asian governments also have ‘‘major programs’’ for
hydrogen, as does Canada (Romm, 2004).
Further, the push toward hydrogen is not simply a
states-only effort. Multinational corporations (MNCs) are
investing in the quest. All the major automakers are
actively pursuing fuel cell technologies (Roberts, 2004;
Romm, 2004). In fact, DaimlerChrysler AG holds that fuel
cells will ‘‘safeguard the future mobility of our societies,
and thus future economic growth’’ (Panik, 2001). British
Petroleum, Royal Dutch/Shell Group, and other oil
companies are also pursuing hydrogen options (Detchon,
2003; Romm, 2004).
5.1. Who will lead?
Transition to a hydrogen economy is expected to
fundamentally alter economic relationships throughout
the world, requiring partnerships among governments,
commercial enterprises in the fuel and transportation
industries, and even environmental groups (Romm,
2004). In addition, the cost of the new technology
undoubtedly will have to be borne by the rich, industrial,
global North (Vaitheeswaran, 2003). One typically thinks
of the US as a leader in innovative, collaborative efforts of
this type. Thus, it is perhaps surprising that the US is not
the leader in the hydrogen chase (nor is Japan, nor any
major European power).
Instead, Iceland is positioned to create the world’s first
hydrogen-based economy; as far back as 1999, Iceland
threw its lot in with hydrogen (Romm, 2004). The US
cannot even claim to be the second nation to commit to
hydrogen power. That distinction belongs to the island
nation of Vanuatu, which in 2000 sought international
assistance to convert its petroleum-based economy to
hydrogen (Vaitheeswaran, 2003).
It is curious that the world’s largest nations have gotten
such a slow start on hydrogen power initiatives while two
island nations are leading the charge. The reason is that
size matters. Island nations must devote a larger percentage
of their economy to purchasing expensive imported oil
(Vaitheeswaran, 2003), so their motivation to wean
themselves off oil is greater. Further, they have smaller
infrastructures, so small scale becomes a cost advantage for
deploying the new technology (Romm, 2004). Iceland has
another distinct advantage over most other locales. Its
geology provides it with abundant hydropower and
geothermal energy sources that would be quite suitable to
‘‘green’’ hydrogen production (Romm, 2004).
As one can imagine, the big nations, with their large
economies, are somewhat less sensitive to the price
fluctuations of oil than are small island nations (as long
as those fluctuations are not too great). In addition, the
large industrialized nations have a huge investment in the
existing oil infrastructure—the wells, pipelines, tankers,
refineries, oil-fired power plants, etc. represent an estimated
10 trillion dollars (Roberts, 2004). As Roberts (2004) notes,
‘‘No company, nor any nation, not even America, can
afford to write that off.’’
Thus, the inertia of the oil economy has played a large
role in stymieing serious hydrogen power efforts in the
developed world. Environmental consequences alone have
not been sufficient to overcome that inertia. The tipping
point, at least for the US, appears to have been the
September 11, 2001 terrorist attacks. The US hydrogen
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S. Blanchette Jr. / Energy Policy 36 (2008) 522–530
vision, as evidenced by various government documents
such as A National Vision of America’s Transition to a
Hydrogen Economy—to 2030 and Beyond, the National
Hydrogen Energy Roadmap, and the Hydrogen Posture Plan
(US Department of Energy, 2002a, b, 2004) crystallized
quickly thereafter.
5.2. Effects on the developing world
Considering the developing world, excluding the oil
producers, one quickly understands that the oil economy
has been somewhat harsh to it. Perhaps surprisingly, the
damage was not done by the high cost of importing oil; in
times of high oil prices, LDCs actually received substantial
aid flows from oil producers, in some cases exceeding the
increased oil costs (Heal and Chichilnisky, 1991).
Rather, the harm came from a more subtle source.
During the high oil price periods in the 1970s, the oil
exporters deposited their current account surpluses in
Western financial institutions. Although the industrial
world was in recession at the time, the developing world
was experiencing growth, leading those financial institu-
tions to productively use the OPEC inflows in the form of
large loans to developing nations, typically at floating rates
and on a short-term basis. The Third World debt crises was
spawned when interest rates rose sharply in the early 1980s
at about the same time that many of the loans came due
(Heal and Chichilnisky, 1991).
Now, consider hydrogen and its possible affect on the
LDCs. In the short term, hydrogen likely would be
imported from developed nations. Since developed nations
are targeting hydrogen prices to be competitive with the
equivalent amount of gasoline (Milliken, 2004), hydrogen
import costs are unlikely to be substantially worse than are
those for oil imports. From that standpoint, developing
nations would be no worse off. In fact, one can conceive of
the possibility of short-term hydrogen price breaks for the
LDCs, in the interest of hastening the arrival of the global
hydrogen economy.
Further, in the long term, hydrogen promises to be
producible anywhere. Therefore, assuming institutions like
the World Bank continue funding global infrastructure
projects, there is the hope that developing nations could
eventually produce hydrogen domestically in quantities
sufficient not just to maintain the status quo, but also to
support growth. That is an exciting prospect.
5.3. What of the oil producers?
In 1976, Sheikh Ahmad Zaki Yamani, then oil minister
of Saudi Arabia, said, ‘‘The big powers are seriously trying
to find alternatives to oily.We hope to God they will not
succeed quickly because our position in that case will be
painful’’ (Hoffmann, 2002). With a strong focus on
hydrogen today, one has to wonder if energy security for
the developed world will spell insecurity for the OPEC
nations.
527
Why just the OPEC nations? Simply, the developed
world has focused on exploiting the oil produced by the
non-OPEC nations first. Consequently, the non-OPEC oil
will dry up first, possibly as early as 2015, as noted earlier.
Since the hydrogen economy likely will not take hold that
soon (Romm, 2004), those producers outside the OPEC
cartel will remain largely unaffected by it. The OPEC
nations, however, figure to be the last oil suppliers on the
planet, and they will experience the brunt of the transition.
Interestingly, evidence suggests that the oil economy
generally has not been all that good for the oil-producing
nations. Certainly, vast sums of money flow into the oil-
producing countries, and they are not without the
trappings of wealth (Roberts, 2004; Vaitheeswaran,
2003). Equally certain is that much of that money has
been squandered on corruption, ‘‘military adventurism,’’
and terrorism (Jaffe, 2004). Yet, there is also a fascinating
phenomenon occurring at the same time. Many oil
producers encounter serious economic trouble, trouble
that has been tied directly to their oil-related activities
(Heal and Chichilnisky, 1991).
For example, according to the World Bank, for the
period 1960–1983, developing nations that exported oil
experienced lower growth rates than developing nations
that did not export oil. The reasons for such an outcome
are intricate, but the bottom line is industrial economies,
that is, economies that are homogeneous and integrated,
are more likely to cope effectively with the consequences of
oil exportation (Heal and Chichilnisky, 1991).
Given this curious economic factoid, one can expect that
the OPEC nations might actually be better off in the long
term due to a transition to a hydrogen economy. With oil
exports declining as the transition occurred, these nations
would have no choice but to reduce their dependence on oil
export revenues and balance out their economies (or face
economic ruin, destabilization, and worse).
In a world embracing a hydrogen economy, OPEC
nations would eventually have to follow suit. Currently,
though, they do not yet appear to be taking hydrogen
seriously. In 2003, Ali Naimi, Saudi Arabia’s minister of
petroleum, asserted his belief that hydrocarbons will be the
fuel of choice for the twenty-first century (Vaitheeswaran,
2003). If they continue clinging resolutely to petroleum,
these nations will doubtless need substantial investment to
convert their oil infrastructure to support a hydrogen
economy long after the rest of the world has made the shift.
That investment could be funded through higher oil
prices: As already discussed, there would be some period
between now and the advent of a hydrogen economy when
OPEC nations would exert considerable control over the
world’s oil supply (and, therefore, over prices). However,
the rest of the world would need not simply pony up as it
did in the 1970s. Rather than pay more for oil, with the
attendant recessionary pressures doing so would bring, the
nations working seriously on hydrogen power could barter
the technology to help the OPEC nations catch up, in
exchange for relatively stable oil prices in the interim.
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528 S. Blanchette Jr. / Energy Policy 36 (2008) 522–530
Indeed, some form of assistance to OPEC countries
would likely be necessary in any scenario. Beyond the
infrastructural changes needed for hydrogen, the OPEC
nations will be challenged to balance their economies in the
absence of oil. Without assistance, the transition from
being developing nations with some global economic sway
to being ‘‘ordinary’’ developing nations likely would bring
unrest and instability to the region, with the potential to
spread beyond.
5.4. Other considerations
The thought of hydrogen as the main energy source of
the world, producible anywhere, raises the hope that
competition for declining fossil fuel resources may one
day be a thing of the past. Such an occurrence would free
politicians to work on resource issues that are arguably
much more serious. For instance, access to fresh water is
increasingly becoming a challenge in many parts of the
world. Life, albeit radically altered from what we are
accustomed to, is nonetheless possible without oil; prior to
the industrial revolution, civilization existed quite readily
for centuries without it. Indeed, as noted earlier, extremely
impoverished people still exist without the benefit of oil for
energy. However, life simply cannot exist without water.
One might even hope that multilateral collaboration on
hydrogen initiatives will serve as a blueprint for resolving
water and other resource issues.
Perhaps the best reason of all for broad cooperation on
energy alternatives such as hydrogen is to prevent the type
of uneven global development that the oil economy
fostered. The imbalance in development promoted regional
instabilities, which in turn have led to various thorny
security issues (energy security being the least of these).
Certainly, energy security is a top priority for the West, and
it can be achieved with relatively little regard for the LDCs.
However, it would be a fool’s bargain to focus narrowly on
hydrogen’s benefits to the developed world at the expense
of the needs of the developing countries. There is much to
be lost by taking a selfish approach and much to be gained
through collaboration.
Take Iran as an example. As a founding member of
OPEC, it has a large stake in the oil economy and little
incentive to move toward change. Further, its compara-
tively low level of economic development1 fuels a fairly
constant disenchantment among the populace that is then
easily exploited and converted to radicalism. Having easy
access to alternative energy sources would allow Iran to
reduce its debilitating reliance on oil and natural gas
reserves as an economic engine and allow it to begin
broadening its economy. Moreover, sincere agreements to
collaborate on energy between the developed nations and
Iran now would clearly obviate any need it might have of
developing its nuclear capabilities, thereby providing Iran,
1
According to Moore and Gardner (2007, p. 24), some 44% of Iran’s
urban population lives in slum conditions.
the US, and the United Nations the means to gracefully
back down from their current confrontation.
More generally, a shift away from the oil economy, no
matter how highly desirable from an energy security
perspective, will serve to further destabilize the Middle
East, the Caucasus, even South America without some
proactive approach to those oil-propped regions. Depriv-
ing the underdeveloped countries of vital oil incomes will
only serve to exacerbate tensions and resentments, and fuel
an already well-stoked terrorist fervor around the globe.
Thus, an inclusive strategy is imperative; without it, we
may gain in energy security only to lose in national
security.
6. The roles of government and market development
As one might have surmised from government activity,
particularly in the US, the hydrogen economy will not
happen just because it seems like a good idea. Significant
government involvement in the development of the
hydrogen economy will be necessary, at least until that
economy is ready to endure the action of market forces.
Such government involvement may take on many forms.
For instance, government must participate in the
research and development investment; industry alone
cannot be expected to shoulder the financial burden. In
addition, there are practical and phenomenally expensive
problems to be addressed in the area of infrastructure
(Romm, 2004). Investment here is clearly in the realm of
government, and such investments now can pay dividends
later. For example, Hjalmar Arnason, chairman of the
Icelandic government’s committee for alternative fuel,
expects Iceland to become a major hydrogen exporter in
the future (Ásmundsson, 2002).
In addition to funding, government is needed to fulfill a
quintessentially governmental role—that of creating (and
destroying) national policy. Romm (2004) puts it thusly,
‘‘only government action can accelerate the development
and deployment of greenhouse-gas-free power sources,
which are key prerequisites for a hydrogen economy.’’
Hydrogen-friendly policies go beyond encouraging devel-
opment of clean power sources, however. Ending protec-
tion of incumbent utility monopolies and removing
regulations that favor existing infrastructure almost
certainly will be necessary for hydrogen to gain a foothold
(Vaitheeswaran, 2003).
Further, policy options are wide open. In addition to
accelerating development of future technologies, thought-
ful energy strategies can influence consumptive behavior
through increases in gasoline taxes, incentives to use diesel
fuel instead of gasoline, regulation of sport utility vehicles,
and even sliding-scale taxes on new vehicles based on their
mileage performance (Jaffe, 2004). The government also
can mandate conversion of its fleets to hydrogen fuel, as
Iceland is doing (Romm, 2004).
US energy policy, in particular, also has influence
abroad. So vast is the US energy market in both volume
 ARTICLE IN PRESS
S. Blanchette Jr. / Energy Policy 36 (2008) 522–530
and in growth that oil suppliers, even generally anti-
American ones, are compelled to keep the US as a
customer (Roberts, 2004). As a result, ‘‘any change in US
policy that can significantly lower the pace of [oil] import
growth could have a telling impact on OPEC’s plans to
increase market share’’ (Jaffe, 2004). When the US moves,
the market rumbles.
Additionally, all nations will need to consider the
policies of the global financial institutions. World Bank
support of hydrogen infrastructure projects will be crucial
in developing regions. Agreements about the hydrogen
trade can be made now in the World Trade Organization
(WTO) to help ensure that the market can develop. In
particular, the WTO would likely need to guard against
protectionist pressures from established energy-producing
and -consuming sectors. The International Monetary Fund
(IMF) will need to be prepared for bumps in the road as
the world transitions to a hydrogen economy.
Equally as important as policy and funding, government
can foster the partnerships necessary to create the
hydrogen economy. Icelandic New Energy Ltd., the
consortium of DaimlerChrysler, Shell, Norsk Hydro, and
other stakeholders, is pioneering Iceland’s transition to
hydrogen, and it enjoys the backing of both the Icelandic
government and the European Union (Romm, 2004).
Another example is the International Partnership for the
Hydrogen Economy (IPHE). The IPHE is a multilateral
arrangement among the US, European Union, and 14
other states ‘‘to organize, evaluate, and coordinate multi-
national research, development, and deployment programs
that advance the transition to a global hydrogen economy’’
(Garman, 2004).
Government action alone, however, will not bring about
a hydrogen economy; ultimately, there must be a market
for hydrogen. Hydrogen fuel must be readily available to
the public, at prices competitive with gasoline. Fuel cell
vehicles must compete, on both cost and performance, with
gasoline, electric, and hybrid vehicle options. Fuel cells
themselves must be safe. Most importantly, the public must
be aware of the option to choose hydrogen and the relative
merits of making such a choice.
In the US, one of the first such markets to emerge may
be in California, where there is an active effort to create it.
The California Fuel Cell Partnership (CaFCP), a voluntary
and collaborative effort between the state government and
31 organizations representing the automotive, energy, and
fuel cell technology sectors, has established a long-term
vision and plan to bring about a viable hydrogen energy
market. Its current 4-year plan has focused on supporting
demonstrations of automotive technologies, developing
public awareness, and educating communities about the
relevant safety codes and standards surrounding hydrogen
use. The next 4-year plan, beginning in 2008, is more
ambitious, seeking to find market opportunities and
address associated challenges with exploiting those oppor-
tunities while also focusing on infrastructural issues with
hydrogen fuel delivery and dispensing (CaFCP, 2007).
529
These examples of collaboration demonstrate the ser-
iousness with which a hydrogen economy is being pursued
at many levels. The California example is especially notable
for pushing beyond the technical issues and political
posturing to begin addressing market development and
even societal preferences. It is an example of how private,
commercial forces can augment the considerable sway of
government to effect change.
In the long term, perhaps even our conceptions of
governance will need to shift and adapt. In 1976, the Italian
scientist Cesare Marchetti perceived a conflict between
nation-state governments and MNCs that he saw as
analogous to the conflict between the states of medieval
times and the Roman Catholic Church. The Church was
believed to be interfering with the individual states and,
since both power centers were necessary, a compromise
that ceded the top layer of political power to the Holy
Roman Empire was reached. The emperor had politically
narrow but territorially broad power, and had the proper
hierarchical position to ‘‘‘deal with the Pope on an even
basis’’’ (Hoffmann, 2002).
From that analogy, Marchetti concluded that world
government, with a similar compromise between nations
and MNCs, would be inevitable and the driver for such a
dramatic upheaval would be the energy business (specifi-
cally hydrogen energy) as the largest single business
concern in the world (Hoffmann, 2002). Could the
transition to hydrogen really go beyond global economics
to realign the very structure of international order?
Elements of such a change (e.g., the various forms of
collaboration on hydrogen initiatives) seem already to be in
place. I leave it to the reader to ponder the question
further.
7. Conclusion
Hydrogen may stand on the verge of becoming a true
successor to oil. While the history of the oil economy shows
that interest in alternative energy wanes with eventual oil
price reductions, the current situation is different. Tech-
nological advances, huge increases in global energy
demands, elevated environmental concerns, anxiety over
potential peaks in global oil production, and a new
appreciation of the need for energy security have formed
a nexus of strong interest in promoting hydrogen as the
fuel of the future.
The appeal of hydrogen is undeniable. It promises to
resolve energy supply and demand problems in ways that
neither non-renewable nor previous renewable sources like
solar or wind ever could. It has the potential to render
negligible to non-existent levels of damage to the environ-
ment. The possibility of producing hydrogen anywhere
may mean all nations will have ready access.
It is clear that hydrogen has the potential to alter the
global economic and political structure in ways more
profound than any previous energy option, despite
uncertainty about how far the technology may progress.
 ARTICLE IN PRESS
530 S. Blanchette Jr. / Energy Policy 36 (2008) 522–530
Developing nations may finally be free to grow. Oil
exporters will need to rethink their economies and likely
will need assistance to avoid chaos. New alliances among
governments, corporations, and other groups may even
challenge existing notions of governance.
However, while a hydrogen-based energy market is both
an exciting and compelling prospect, clearly it is only a
metaphor for any viable alternative to petroleum-based
fuels when considering the long-term affects on the oil-
driven international economy. Any alternative power
strategy that can significantly alter oil consumption
patterns in the developed and developing worlds will lead
to problems in those countries whose economies are
dominated by oil exports, and the rest of the world will
be challenged by unevenness in the transition.
Thus, what is also plain is that if the long-term vision for
breaking global dependence on oil is ever to be reached,
near- and mid-term thinking are needed to manage the
transition smoothly. Without a doubt, there’s a choice to
be made. If a hydrogen energy market develops in a
manner similar to that of the oil market, the global status
quo likely will be preserved. That is, the developed world
will continue to exercise undue influence over energy
markets, and the developing world will continue to struggle
and continue to be resentful of its lot.
The other option is to make hydrogen energy options
available to everyone. That would be a huge undertaking at
perhaps an unfathomable cost. But consider for a moment
the possible benefits. Easy access to energy would allow the
developing world to develop much more quickly, spurring
not just local economies but the global economy as well.
Availability of hydrogen fuel in these nations also means
that billions of people need not contribute to the
environmental impacts associated with burning fossil fuels.
Lastly, with better standards of living and improving
economies, the ranks of the disaffected may begin to shrink
globally, making it difficult for terrorists to recruit new
members. Creating parity in a hydrogen economy might
actually present an option, perhaps the only one, for
winning the war on terror.
A change from oil is surely coming, whether it is to
hydrogen or not. We must begin making decisions now if
we are to handle the transition smoothly.
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