Over breakfast this morning I read some scary stuff in The Independent… http://news.independent.co.uk/sci_tech/article2656034.ece
The article basically says that oil supplies will start to diminish quicker than previously thought and goes on to talk about "peak oil" theory. "Peak oil" is basically the point at which global oil production starts to fall due to the exhaustion of existing oil fields and the lack of significant new discoveries.
"Peak oil" was reached in the US back in 1970 and US oil production has been in decline ever since. Some people think that global oil production has already peaked, others think it is now, while more think it is in the very near future – regardless it is very close and after it’s been reached we are on the road to ruin!
I did some research tonight and found some interesting, if not disturbing, sites…
With the emergence of China and India and their increasing reliance on oil, it can be seen that a dichotomy is emerging – while global oil production will begin to decline, global demand will continue to grow. While the oil won’t actually run out for some time, our inability to get the stuff out of the ground quick enough to meet demand will cause major political and economic problems.
What is scary is just how reliant we are on oil. Most oil is consumed through transportation, so any disruption to the supply will not only cause huge rises in the price of petrol, but could actually limit the ability to transport goods around the country. As all supermarkets are supplied through a network of distribution depots using huge gas-guzzling artic lorries, we may suddenly find our supermarkets experiencing empty shelves on a more and more frequent basis. Maybe it’s time to start growing our own food just like our fathers and grand-fathers used to do?
And if the price of oil jumps, this will feed through into manufacturing costs, leading to higher prices for everything. A viscious inflationary cycle could begin leading to the collapse of major western economies – we could be talking about a major global recession here with stock markets crashing around the world. Oil will probably flow to those countries that are prepared to pay for it; perhaps countries such as China, that have huge foreign currency reserves, will be able to keep their supply of oil flowing for some time (some figures I have seen suggest that China now has a $1 trillion surplus), but where does that leave western ecomonies that have been running in defecit for some time? Countries such as the US will be the first to go bankrupt and we could see living standard plummet in western countries as the oil supply becomes more and more restricted.
Maybe it’s time to think about changing your pension investment strategy and moving away from equities? With global stockmarkets at an all-time high, maybe now is a good time to move into more defensive funds to isolate you from any potential collapse. Of course the collapse might not come yet, but with interest rates rising, bonds may be a good place to shelter your investments while the collapse occurs (I notice even Sainsbury have launched an internet savings account paying 6% per year – not a bad rate at all for what is basically a cash account). Imagine the outcry if everyone’s pension funds are suddenly reduced by 50, 60, 70% due to stock market turmoil? Some of the things I have read tonight indicate that we could be heading for a major economic slump within 4 years – all it would take would be a small percentage growth in demand that could not be satisified. With global demand increasing by 2% per year, we are only looking at a couple of years once peak oil has been reached before a crunch occurs. I’ve read that there is already very little slack in the supply line with Saudi Arabia pumping oil flat out and unable to "turn the taps on" any more than they already are.
Imagine a world where oil is so expensive that things you take for granted today are no longer feasible. Cars will litter the roads with empty fuel tanks, Heathrow will be deserted because no-one can afford to fly anywhere, BA will have gone bust a long time ago along with all the shipping and haulage firms. Supermarket shelves will be empty because the food transport system has collapsed. Mass unemployment will lead to riots and civil unrest as the Government can’t afford to pay state benefits at anything like the level required. Companies will go bust, ruining your equity investments. When it’s time to retire your pension will be worth very little.
One thing the UK isn’t short of is coal, so maybe we’ll start to see steam engines on our railways again, steam powered cars and steam powered machinery. Of course this might not be politically acceptable due to the amount of pollution caused by burning coal, but we’ll probably be past caring by then.
So with society reverting to earlier forms of technology, how long until we revert back to the stone-age? Will we have all killed ourselves by then anyway in an apocolyptic war fighting over the last few drops of black gold?
With our inability to produce oil based products (e.g. plastics?) will we start to dig up our rubbish dumps for materials that we previously, frivolously, threw away?
Maybe our dependence on oil will be seen as a mere blip in the evolution of the human race?
What if we have kids – will they be angry that their parents gorged themselves on oil and left nothing for future generations? It seems likely.
Whatever happens, there seem to be a lot more questions than answers at the moment, and it’s scaring the shite out of me.