Cornwall ON – As we saw in the previous article, Peak Oil is something that will happen, whether we like it or not. No politician or government can stop it, and no amount of denial can stop it. It will happen, period.
North Americans, on the other hand, have always been spoiled rotten when it comes to paying for energy, and very soon will have to start paying the consequences. As oil becomes scarcer, supply and demand will rear its ugly head. If anyone thought that 2008 prices for gas and diesel were excessive, “you ain’t seen nothing.”
However, it is the Indian/Chinese/Japanese bloc which should give rise to sleepless nights. This area is accelerating its oil consumption at ever increasing rates, far higher than North America, Europe and the rest of the world, but has very few oil reserves. Don’t forget, when the Japanese attacked Pearl Harbor in 1941, for them it was a war to secure natural resources in the Pacific, (what US administrations now refer to as “energy security”). Will this same pattern repeat itself?
Simple morals and ethics complicate the situation. Why shouldn’t the Chinese and the Indians increase their standards of living? Why shouldn’t the Japanese maintain their standard, which is comparable to our own? Who are we to say to almost two billion of the world’s population that they must remain in poverty so we can drive gas guzzling Chryslers?
In the middle of this free-for-all stands OPEC, which controls a major part of the world’s oil reserves, and which is steadily accelerating its own consumption, thanks to massive internal subsidies. At the moment it is in OPEC’s best interest to maintain stable oil production and prices. It tries to keep a fine line, keeping the price for crude as high as possible, to maintain their own economies, yet low enough not to push the world into another recession, which would lower both price and demand.
However, we must remember that OPEC began as a political organisation in response to the Arab-Israeli war in 1973, and it was never its intention to be a friend to the west. The aim was to end western support for Israel by withholding oil. This led to massive oil price increases, an almost continent wide 55 mph speed limit to conserve gas, and a recession. The sanctions were lifted only when the Americans forced Israel to get serious at the Camp David peace accord.
OPEC controls oil, and it can sell it to whomever it wants, and there is little the Americans, or anyone, can do about it. As Chinese (and Indian) demand increases, more and more oil is going to be diverted to the east, rather than to the north and west, especially if these countries are ready to offer the right price, or can offer OPEC countries goods for which there is a demand.
There would probably be little problem if OPEC could just turn the taps higher, and produce more to account for world demand. However, this simply isn’t going to happen, because OPEC doesn’t have the capacity. Even Saudi Arabia, the world’s largest single oil supplier, is starting to feel the effects of peak oil, and has to use enhanced recovery techniques to squeeze the last oil from one of its major oil fields.
Next time – the Impact of China – you can post your comments below.