Monday, 3 August 2009

Kicking the habit

Doom and gloom for Monday morning, "Warning: Oil supplies are running out fast - Catastrophic shortfalls threaten economic recovery, says world's top energy economist" (The Independent)

Many of us have been watching the concept of peak oil for some time, calling for urgent action to kick the oil habit. Last year oil hit $150 a barrel, just as the world economy also hit its peak before going into free fall. Oil prices went into a similar but even more dramatic free fall, dropping to $40 per barrel by Feb 2009. Prices have climbed slowly since to $70 this morning.

Almost all of the world's economy is based on oil and basic economics dictates that as supply for a product falls and demand doesn't fall by a similar amount then price will increase. This rise will be greater with more 'inelastic' products like, er... oil. Just like climate change, many (especially in the oil industry) have their heads in the sand - 'we're not running out of oil' etc. While it's true there is a lot of oil left, extracting it is getting harder, slower and more expensive - and of course it is a finite resource.

The concept of using finite resources as if they will never run out is perhaps the greatest mistake of all. The only resources we should consider expendible are the renewable ones. All finite resources should be used with care and as investments. No company would pay its staff from share capital, it would only ever use that to buy capital purchases and get the company running, yet we are running our economy on millions of years of stored sunlight energy and we won't be able to do it for very much longer.

The second comment on the Indy piece was sad and true: "we can be fairly certain the last of the oil will be used fighting [futile] wars to secure the last of the oil."

Time to kick the ol' oil habit, renewable energy patch anyone?

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