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Commons

A Crude New Year

ST Frequency

 

Only two days into 2008, the price of oil rose to the long anticipated $100-a-barrel milestone on the trading floor of the New York Mercantile Exchange.

Reasons for the record high have been attributed to recent geopolitical tensions, among other environmental and financial factors. Unrest in Pakistan following former Prime Minister Benazir Bhutto's assasination in late December saw crude prices jump, and a series of militia attacks in a key Nigerian oil city on New Year's Day added to fears of petroleum supply disruptions worldwide.

Compounding these market-destabilizing events is an insatiable thirst for oil in developing China and India – an ever-growing demand for fuel that some worry can no longer be met by global production. Proponents of Peak Oil theory, who hold that the world's petroleum reserves are nearing (or have already passed) maximum output, are trumpeting the $100 mark as proof of an emerging oil scarcity.

Whether a harbinger of global economic decline, or a call-to-arms for conservation and efficiency, the three-figure price represents a momentous event in the history of the Oil Age. As quoted in a Bloomberg.com article, energy anaylst Rick Mueller observes a deeper significance in the $100 landmark, a shift in the public consciousness regarding energy costs: "This is an important psychological number ... Everyone has been expecting this since early December."

Others view the event as a crucial turning point in the petroleum economy – a threshold crossed, from which there is no going back. "These prices are here to stay," asserts Emil Pena, a former assistant secretary of energy for President Clinton and oil industry consultant. "We have to come to grips with these high prices." The future of cheap and abundant energy is being seriously called to question, along with the fate of our expanding, energy-dependent global society.

As the major events on the horizon for 2008 come into focus – a Presidential election in the U.S., the Olympic games in Beijing – the worldwide mood is one of tense anticipation. It is impossible to know what profound changes await us in the new year, but we can be assured, they have already begun.

 
Image by Gabriel Paulus, used under Creative Commons license.

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price is not the problem

When I was in college gas was 35 cents a gallon, cigarettes were 35 cents a pack, people made $6,000 a year and houses were $35,000. Now gas is $3.50 a gallon, cigarettes are $3.50 a pack, people earn $60,00 and houses are $350,000. The problem is not the price. The problem is the cost in terms of environmental degradation and human suffering and the corruption of democratic process. And we are paying a price that is about to get a lot higher in terms of true costs. When I was young, the cost of a McDonalds hamburger was 12 cents and the fries were 13 cents. The True Cost today is the entire Amazonian rain forest being clear cut to grow soy to feed chickens for McNuggets. As Esau, we are choosing to trade our birthright of a healthy life on a beautiful planet for a mess of very sickening pottage indeed. And yet i feel almost certain of the ultimate evolution of societal conscience, and of homo sapiens in the process.

look who is sounding the alarm

This article doesn't strike me as a typical reality sandwich critical inquiry. It sounds more like a New York Times propaganda piece, though perhaps it is merely a result of very lax investigation. While ST quotes Emil Pena about $100/barrel oil prices being "here to stay," the link at the beginning of the article itself says that not only have those prices fallen, but that the high price is a result of a market inflation bubble.  The real question, though, is where do these price predictions come from, and who benefits from reports like these? It is more than a little disingenuous to suggest that Emil Pena has merely a political advisory and consulting relationship to the oil industry: more to the point, he is an oil executive, whose company Genoil has something to gain from people believing that the price of oil is set to skyrocket without end (that company, which refines oil, has a market interest in inflating the price of its refined product by exaggerating the cost of its input). ST uncritically mentions "unrest in Pakistan" and "a series of militia attacks in a key Nigerian oil city" as legitimate explanations of oil price hikes, but this is pure propaganda. Stories vaguely suggesting a possibility of disruption of oil production are routinely used by oil companies (and newspapers that print whatever their PRopaganda office writes) to justify consumer gasoline price hikes, when no real disruption (i.e. cost to the company) has occurred (thus generating pure profit through nothing more than a well reported false news story). Gasoline prices continue to climb, and meanwhile oil companies are posting the highest quarterly profits of in the history of the world.  The point of all this is that, in an environment where there is such an extraordinarily huge financial incentive to manipulate information about costs and supplies, one cannot trust what one reads to be impartial. Especially not this information, when you see where it is coming from. Nobody knows how much oil is left in the earth, but you can be sure the oil companies will milk the Peak Oil story for as much as they can, for as long as they can (just as car companies have used global warming to market hybrid cars that are only marginally better, and sometimes worse, than the fuel efficiency of many standard gasoline cars on the road fifteen years ago).All of this is not to say we do not have an oil problem, but the problem is consumption, not cost, as shamanana points out. Those of us who have the opportunity to do so should make it a priority to live a lifestyle where we do not need to commute large distances to earn a livelihood, or buy food that travels hundreds of miles by truck to make it to our stores. Bicycle coops, food coops, housing coops, and (if necessary) car coops a la Zipcar, if they became a widespread worldwide phenomenon, would do much to eliminate the problems of oil consumption.
Picture of <em>ST Frequency</em>

Thanks for your comment. I

Thanks for your comment. I appreciate the observation about the possible ulterior motives of the articles I'm linking to here. The point I was making in this post was to recognize that hitting the $100-a-barrel price is a landmark event in the petroleum economy. I was especially intrigued by the comment that ascribed "psychological" importance to it. I also found it interesting that it came at the turn of a new year, one that promises great changes down the road.

Peak Oil and the runaway petroleum economy are contentious issues, and I don't wholly disagree with what you're saying -- especially in regards to consumption being the larger problem (as I mention in reference to China and India in the post). But the fact that all known remaining motherlodes of crude are positioned in increasingly volatile areas of the world does, by my estimation, pose a looming threat to the continued smooth operation of a globalized, energy-dependent world. As interdependent as we've become, a political meltdown anywhere on the planet can have unsettling and potentially calamitous effects worldwide. Irregardless of the spin (or avaricious market manipulations) that Big Oil might put on fears of scarcity and supply disruptions to their own benefit, this circumstance appears to me to be worthy of legitimate concern.

Peak Oilers suggest that, as we descend down the bell curve of decreasing supply, we will witness many such "bubbles" in the price of crude, as OPEC and oil execs reap the dregs of the market. Yet after awhile, they predict, the climbing prices will be very real and permanent reflections of dwindling supply against enormous demand.

-st

Picture of <em>Thomas Vaughan</em>

£1,290 Cars to be Unveiled in India

The future of the motor rickshaw? 

 

 

The £1,290 car delights Indians but horrifies the green lobby

 

Amelia Gentleman in New Delhi

Sunday January 6, 2008

The Observer

 

 

After years of secret preparation, the world's cheapest car will be unveiled in Delhi this week - delighting millions of Indians as much as it is horrifying environmentalists.

 

At 100,000 rupees (£1,290), the People's Car, designed and manufactured by Tata, is being marketed as a safer way of travelling for those who until now have had to transport their families balanced on the back of their motorbikes.

 

Ratan Tata, 70, chairman of the family-run business, who has spearheaded the race for a cut-price car, wrote on the company website: 'That's what drove me - a man on a two-wheeler with a child standing in front, his wife sitting behind, add to that the wet roads - a family in potential danger.'

 

http://observer.guardian.co.uk/world/story/0,,2235975,00.html