Looking at the latest movements in the price of crude oil, which peaked at 145 and subsequently corrected down to 122$ per barrel, we are going to analyse a possible strategy that could, at the very least, alleviate our dependence on oil and the resulting speculation, as well as minimise thethe effects of peak oil. Let me explain: When, just a couple of weeks ago, we were seeing record-high prices, there were persistent voices (some with vested interests, but others without) warning us of the likelihood that the price would soon exceed $150, heading towards the 200 $ target. No one knows how high the price of crude oil might rise. Nor is it clear how well the world’s economies will be able to cope with a price per barrel that could quadruple in just 24 months.
But what we do know is that, at 145$, the world has not ceased to exist. Global macroeconomic structures have come under extraordinary strain, and countries dependent on massive oil imports are suffering and experiencing record levels of decline. Economic figures are therefore deteriorating, and first-round inflation is sweeping away the fragile balance achieved during years of prosperity. But despite all the difficulties, the world has not ceased to exist, and it is unlikely to do so even if the price per barrel reaches 160 or 170 $.
On the other hand, we must acknowledge that no country has yet been able to replace its dependence on oil in an efficient, sustainable and sufficient manner. The investment required is prohibitive for governments, and for the private sector these projects are not yet attractive enough to be undertaken on a large scale. To take just one example, the boom in solar farms is only expected to meet 10% of energy demand over the next 10 years. And we must not lose sight of the fact that their profitability is based on prices which, far removed from market forces, are underpinned by legislation. For this reason, it is unlikely that private companies will meet the demand for alternative energy production on a large scale in the short or medium term. That is far too long, given the state of the planet.
However, these alternative energy needs could indeed be met through massive state subsidies. Or indeed, the country could be flooded with semi-public or state-run solar or wind farms. With sufficient resources, the right to secure and affordable energy could be guaranteed by the state for as long as the private sector is unable to do so on a viable basis. However, as soon as private companies become efficient and capable of producing the necessary energy profitably and at reasonable prices, the state should withdraw from the scene, intervening only in the event of imbalances or energy emergencies. In other words, solely to guarantee citizens’ fundamental rights.
There is no doubt that if governments could guarantee such alternative energy generation, the planet’s future prospects would be infinitely less compromised. Let us imagine a global economic system with surplus and reasonably cheap energy, even with the growing needs of emerging economies met. It is true that we would continue to cause ourselves harm through our own ineptitude; we might continue to abuse credit and carry on playing dangerous games with bubbles of all kinds. But what is clear is that a guaranteed energy supply at reasonable prices would be the philosopher's stone of humanity’s future progress.
The key question is: Where can we secure the necessary funds to provide massive subsidies for, or publicly generate, sufficient alternative energy? At this point, we should recall the saying, «desperate times call for desperate measures«: Turning the need to ensure a sustainable and sufficient energy supply into Reason of State, the all-time high price reached by crude oil could be maintained through state intervention. In other words, the difference between the all-time high price and the actual market price of oil at that time would be channelled into a special budget item. A sort of National Energy Generation Plan could even be created, with an official body such as the Nuclear Safety Council which would be responsible, for example, for subsidising or setting up solar farms on a massive scale.
If the profits from these energy-generation projects were reinvested in the development of further facilities of this or any other kind of alternative energy generation, the State’s capacity to generate energy would multiply within a few years. In the meantime, unfortunately, the non-oil-producing world would continue to suffer from the strain of oil prices at artificially high levels. It would obviously not benefit from corrections and easing in the market price, and its macroeconomic figures would also continue to be adversely affected at historically high levels. But the light at the very end of the tunnel would be clear, and our pace of progress would steadily accelerate. Furthermore, the adoption of this strategy by a large number of non-oil-producing countries would drive down speculation very decisively, thereby creating a positive cluster effect copy.
But let’s put what we’re saying into figures: At current levels, with a spread between the current price per barrel and the all-time high of 23$ (145–122), we’re talking about more than 37 million dollars newspapers in Spain only, whilst worldwide, more than 1,950 million dollars newspapers the search for and deployment of alternative energy generators. Furthermore, as we have already mentioned, the start of this process would coincide with the period of lowest efficiency and energy generation capacity. This is because, once the first facilities come on stream, the energy generated could either be channelled to alleviate the stifling effects of maintaining price caps on the economy; or the proceeds from its sale at official or market prices could be reinvested, thereby increasing the daily amount available for generating more energy.
As we said at the outset, imposing a permanent tax on the cost of oil imports could only be justified on grounds of national interest. The drawbacks and the number of people adversely affected would be enormous. But in return, we would resolve our dependence on fossil fuels once and for all and eliminate the pressure exerted by oil-producing countries (OPEC), we would reap countless environmental benefits, and ultimately yet another World Order would be established – one that is far more stable and conducive to sound development.
Meanwhile, the all-time highs dictated by market forces are squeezing the lives of non-producers in favour of OPEC and its havens of abundance, such as the Dubai shown in the previous photograph. The fact is that Wealth with a capital ‘W’ is shifting at a far greater rate than the daily figures cited, as we had already warned in Monopoly either ends in bankruptcy or doesn’t end at all. In fact, the pace is proportional to the price of crude oil and, to a much lesser extent, to the imbalance in China’s trade balance. And I believe that the non-oil-producing West should consider some major remedy, even if it hides behind the ever-dangerous concept of ‘reason of state’.
It is unfair for one generation to be held accountable for the actions of the previous one. We must find a way to protect future generations from the greed or incompetence of the present ones.
Napoleon Bonaparte.