Now thanks to the lower tax and the exemption from Ken Livingstone's congestion charge expect many more cars and

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Now, thanks to the lower tax and the exemption from Ken Livingstone's congestion charge, expect many more cars and vans in London to switch to liquid petro- leum gas (LPG) in the months ahead.The distribution of gas is rather different to that of oil, as the third and fourth pie charts show. Russia, plus the other former USSR countries, has slightly larger reserves than the Middle East. And in gas production the Middle East is much less important than it is in oil: less than 10 per cent of the world supplies.So as oil becomes tighter, expect a gradual switch to gas. It is a less convenient fuel because it has to be kept under pressure and by weight it has lower calorific value So it will never fuel aircraft. But it is cleaner and it can be fitted into the oil economy without massive additional investment.This benefits Russia. It is closer to the main market of Europe so the gas can be transported by pipeline rather than ship.

And it has 80 years of supply against Europe's 16 years, so it can offer long-term security. Getting the future relationship with Russia right is important to the US from a strategic point of view. Getting it right is even more important to Europe from an economic point of view.Still, this is all pretty unsatisfactory. In an ideal world, neither the US nor Europe ought really to be too dependent on the Middle East or even Russia for their energy. Is there an alternative? I was intrigued by the final chart, which comes like the others from BP's excellent annual review of the petroleum market and which, as you can see, shows the oil price since 1861 in both current dollars and present-day dollars, ie adjusted for inflation.In real terms oil was very expensive in the middle of the 19th century, became progressively cheaper until the two oil shocks of the 1970s and has now settled into its late 19th-century range of $10-$30 a barrel.So during the period when the world gradually switched from a coal economy to an oil one, oil became progressively cheaper. You could look at that the other way round and say it was because oil became cheaper that the world made the switch, and to some extent that must be true. But oil was more suitable for those two key 20th-century technologies, the car and the aeroplane.Looking ahead, it is easy to see the switch from oil to gas noted above, but that only buys some time.

The really interesting question is what technology will come along next and replace petroleum. It won't be nuclear or the currently fashionable idea of wind power (a medieval technology) Hydrogen-powered fuel cells? Maybe, but not for a while. My own favourite candidate would be conservation: wait, for example, for LEDs to replace the regular light bulb. But that too will take a generation.Meanwhile we need stability in the Middle East – and we had better be nice to Russia.. Last Tuesday the European Commission released a scathing report accusing Germany, France and Italy of dragging their feet on market liberalisation. The Commission claims that, in doing so, these countries are jeopardising the success of the so-called Lisbon agenda – agreed by EU members at the Lisbon summit in 2000 – calling for Europe to become the most competitive trade bloc in the world by the year 2010. There are many obstacles in the way of the agenda, of which market reform is only one.

Another is the increasing environmental regulatory burden placed on industries operating in the eurozone. This has had a direct impact on creativity and innovation and so, indirectly, has also affected financial and property markets.Don't get me wrong: regulation is good. It holds obvious benefits for both public health and the environment. Without regulation, there would be more pollution and lower safety standards in the the workplace.However, too much regulation can be harmful. This is not (officially, at least) a view shared by the majority of policymakers within the European Commission, where it is argued that it is possible to combine strong economic growth with strict environmental regulation. The idea is that companies will increase market share as consumers flock to greener producers.One of the most celebrated examples of this thinking was the Swedish decision to ban the bleaching of paper with chlorine, leading the country's pulp and paper companies to develop chlorine-free paper. By chance, Greenpeace launched an anti-chlorine bleach campaign in Germany shortly afterwards, and as a result the Swedes captured 25 per cent of the paper market virtually overnight.But this is the exception rather than the rule.Regulation that is too strict generally stifles innovation.