- A historic rise in energy demand in emerging economies such as China, India, etc.
- Decline in oil production due to depletion.
- The lack of sufficiently advanced and widespread alternative energy solutions.
As for the first factor, it is obvious that the main player is China, with 1,300,000,000 people whose government has embarked on this path of state capitalism. Their growing demand has only just begun, and if India follows in their footsteps even slightly, the planet will have to meet the energy needs of a further 1,000,000,000 people. The figures for these emerging economies are so overwhelming that the West and its vanity are left looking powerless and pitiful.
The second factor is perhaps the most worrying, and yet the one that has been most predictable. The zenith or peak oil (although many have seen it as a box-office high) is a evidence for almost 10 years now. But we have stubbornly refused to pay any attention to it until the price per barrel has risen 2.5-fold over the last year and a half. And we say it was predictable because we have seen it rise tenfold over the last decade, as all the expert opinions were all pointing towards the end of the era of cheap oil.
It should be borne in mind that current prices make it possible to exploit fields where extraction costs previously exceeded the required rate of return. But in most of the large, long-established traditional fields, crude oil no longer flows as freely as it once did. Extracting the second half of a field’s reserves is much more costly and slow – very slow indeed. The crude becomes much thicker and must be pumped, and the difficulties multiply. The picture is therefore very different in a young well in a young field, where the liquid gold gushes forth with vigour and barrels flow freely and ceaselessly. The large, traditional deposits are now producing at a snail’s pace, yielding little and at high cost, and despite technical advances, production costs and volumes will never return to what they once were. Just like life itself…
It is true that today’s offshore platforms bear no resemblance to those of a decade ago; today, drilling reaches depths of up to 3,000 metres, whereas in the past, drilling beyond 300 metres was considered a risky operation. Furthermore, the precision of the surveys and, above all, of the drilling operations (carried out at a pre-determined angle and in a pre-determined area with an accuracy of just a couple of metres) means that extraction is much more precise. But the depletion of resources is inevitable and we must to go in search of new cheese, with new flavours that will surprise us, as the well-known fable goes.
The third factor in this perfect storm has a great deal to do with human behaviour. Foresight and long-term planning are virtually non-existent when it comes to humanity as a whole. Not even politicians tend to anticipate problems beyond their own terms of office, and in most parts of the world there is scarcely a political class to speak of. Alternative energy sources are still in their infancy and cannot yet serve as a viable alternative to our dependence on liquid fuel. We will only strive to achieve alternative solutions when they are not alternatives but mandatory measures. Sadly, with a few exceptions, this is how the human race behaves on a global scale.
With the price of a barrel exceeding 140 $, we begin to feel the pinch. Transport is affected; protests, strikes and so on begin. Any palliative fiscal measures that European governments might take will be nothing more than a stopgap. At least not until a decision is taken to generate alternative energy on a massive scale, and to achieve this, the problem must be made a matter of national importance and drastic strategic measures must be taken. Let us hope it is only a matter of time before we set out resolutely on this path, but the sad truth is that we will only do so when the price per barrel becomes sufficiently suffocating.
The world’s poorest people are already suffering the consequences of the sudden, burgeoning production of biofuel, which is driving up the price of the raw materials that form the basis of their diet. A despicable and shameful famine. But there is also the danger that dependence on exorbitantly expensive oil will persist long enough for the damage to the world’s economies to become too severe. The current uncertainty centres on whether we will manage to switch to alternative energy sources in time, before suffering a genuine economic collapse that would be almost impossible to reverse. If not, the energy deficit will prove unbearable for the fundamentals of the world’s major economies, and the consequences of this deterioration could trigger the worst global recession in history. The following chart shows the prediction of certain doomsayers, whose views we are, however, far from sharing:
Personally, I firmly believe that we will be able to preserve these fundamentals and that the First World’s need and instinct for survival (the Third World, unfortunately, cannot do any more) will lead us to find a viable alternative to accompany the multiple crises, hardships and other restrictive measures.
I remember a certain well-known, short-sighted economic analyst who, at the height of the credit crisis last August, said off the record something along the lines of: «The credit crisis is the worst in history. What else could possibly be worse for the global economy? The oil crisis is an old familiar foe whose consequences are entirely predictable»… They’ll never learn, my dear and much-admired Nassim, they’ll never learn.
Saudi Arabia continues to «reassure» us with its now-familiar line that «there will be oil for everyone», but I was taught to be wary of anyone who claims to have a good hand but refuses to show it; perhaps the good hand is for the Saudis, or perhaps not even that. If information is power, it is clear that the West is very vulnerable in the face of uncertainty over actual oil reserves. And yet the transition to a new energy model is dangerously far from becoming a strategic matter of state. Meanwhile, other short-sighted people are up in arms because a Spanish electricity company might be bought out by another European one «for strategic reasons». Come on, politicians: ‘Strategy’ is written with a capital S. But as I was taught to take personal responsibility for everything that happens, all of us living in the developed world share responsibility for having elected our leaders.
«We must not lose faith in humanity, which is like the ocean: it is not tainted just because some of its drops are dirty.»
Mahatma Gandhi.
Let’s hope that Mad Max doesn’t cease to be science fiction and become a mere caricature of reality dystopian.