The chemistry teacher came in with a box under her arm. “Does anyone believe that I have something here that can lift a tonne weight a thousand metres into the air?” She opened the box to show a litre bottle of petrol. “In the engine of a car at the bottom of a hill this much petrol can do just that.”

Petrol is a truly amazing substance – it is readily stored and transported while packing an immense amount of energy into a small volume. Married to the internal combustion engine, it fuelled the transport revolution of the 20th century and became crucial to the entire global economy.

The mineral oil from which petrol and diesel are produced is now expensive – a fact that is intimately bound up with the world’s current economic woes. To try to work out what this means for the global environment, the first obvious questions are these: why are prices so high? And how long will the high prices last?

Oil is expensive because everyone wants it and supplies are limited, with no sign of a significant increase any time soon. Prices have always been somewhat volatile and underlying trends tend to be masked by shorter-term factors such as refinery capacity, weather, politics and wars. But the stark reality is that we now know the earth’s oil and gas reserves pretty well and most of the readily accessible ones are significantly depleted. There’s still a great deal of oil and gas in the ground, but it will be expensive to recover.

In addition, 80 per cent of the remaining reserves are controlled by governments – as opposed to companies – and these governments are starting to regard their shrinking oil and gas resources as something to be guarded. King Abdullah of Saudi Arabia recently described his response to new finds: “No, leave it in the ground … our children need it.”

Before the credit crisis hit, oil producing nations saw that $100 oil did not cause the world economy to collapse and it seems likely that they will defend a price that is at least that high going forward. Moreover, the decline in the value of the US dollar in which oil is traded has reduced their real income. In other words, they have little incentive – and probably minimal practical capacity – to accede to pleas to produce more and charge less. High oil prices, then, are probably here to stay.

What will this mean for emissions? Will high oil prices limit consumption and cause a dip in the world’s CO2 output? I suspect that energy demand from developing countries will continue to grow – albeit slightly more slowly. So although emissions won’t fall, it’s possible they’ll stop accelerating quite so fast. On the other hand, high oil prices might make coal power more attractive or encourage countries to keep old, inefficient power stations in service. Since coal is more carbon-intensive than oil, this could offset any emissions benefit.

More significant is what the high oil price and the credit crunch will mean for the transition to low-carbon energy sources such as wind, nuclear and second-generation biofuels that don’t threaten food supplies. On a 40 year time scale, I am fairly confident that a low-carbon economy is possible, with electrical and biofuel surface vehicles; aircraft partly on biofuels; ships on micronuclear or biodiesel; electricity powered by renewables and electrical storage to manage intermittency, as well as some nuclear and gas.

It’s too early to say how big an impact the downturn will have on this low-carbon transition. In reality, though, it will probably prolong it – even if the political and industry rhetoric remains unchanged. That isn’t good news for emissions.

It’s true that, with oil prices of more than $100, alternatives energy sources become more financially attractive. But coal is still abundant and cheap, and it can be processed into synthetic vehicle fuel for much less than the present price of oil, as well as being burned to generate electricity. The three most energy hungry economies in the world – China, India and the USA – have more than half the world’s coal reserves and look likely to use them. China, in particularly, is commissioning about two medium-large coal-fired power stations each week (in addition to a very ambitious wind, nuclear and hydro programme).

Perhaps the key question, then, is how quickly the world develops and rolls out CCS – carbon capture and storage, the technology which allows power stations to capture the CO2 as it is generated and immobilise it for tens of thousands of years. The preferred option is to store the CO2 underground in geological structures such as abandoned gas fields. Because this may not be practicable everywhere, and because at high pressure the gases form dense liquids, experiments have been proposed to explore whether they could be accommodated in hollows in the deepest parts of the ocean floor. Such storage would be against present international law but it might turn out to be the lesser of two evils.

If a viable technology were developed to pull CO2 directly from that atmosphere, that too would be helpful.

My feeling is that on the crucial question of CCS, the economic downturn won’t make a huge difference, because the heavy expenditure on deploying the technology is a decade away. As long as governments and companies invest now in the research and development of the technologies – and as long as breakthrough made in the west are shared with developing nations – then we will still have a chance to control our emissions in time.

What seems certain, however, is that we are entering a new era. The century of cheap energy is behind us and the present crisis is not one to be struggled through with the prospect of going on as before when it is over. Energy and everything that depends on energy will be relatively more expensive in the future – we are all going to have to work longer and harder to pay for it. That is the other inconvenient truth.