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$60 oil is BAD NEWS!

6.21.2005

Its not exactly my area of expertise but it cant have escaped many of your notice that the price of oil has moved toward all time highs today of $60 in New York trading. The knock on effect of expensive oil is myriad and even economists struggle to predict the impact it will have on the world at large particularly industrialised states.
I only have a number of small and perhaps obvious contributions to make but I seriously welcome anyone’s contribution on this hot topic. Its preoccupying many of the worlds top states so that’s reason for us all to have a position on it.
So my points, in no particular order;
1) The rising price of oil has the potential to guarantee a vast amount of wealth to any nationalised oil company. Most of our new oil discoveries are coming from African exploration in Nigeria and the Atlantic coast. The rising price of oil dramatically increases the paper value of Africa as a whole. However the majority of people in Africa have ZERO access to their own resources or the wherewithal to ensure that the government can renationalise the oil industry to an extent and redistribute the wealth. It is a key component of any democratisation process that mineral rights are addressed. On the current terms of trade with the West, Africa all but gives up its right to its own natural mineral wealth. This is an obscene culture but the reality of global politics means that the G8 China and India are going to resist any democratic movement in Africa that supports retaking oil wealth and redistributing it. The resulting insecurity in access to oil makes states quake.
The only conclusion to reach is high oil prices are bad news for any hopes of a home grown re-/evolution in Africa similar to the one in Bolivia at the moment.
2) The Euro has sunk to near three year lows against the dollar recently and any insulation that Eurozone countries had against oil price rises have now dissipated. This is bad news for Eurozone economies and particularly bad news for states struggling with manufacturing industry. Its also bad news for the gas-guzzling nation that is the Irish republic. There has never been a bigger onus on government to start some strategic thinking and forward planning, but then how good have they been at it so far??
The fact is that majorly expensive oil means that the spread of industrialisation as the cure to all other countries ills is at best impractical and at worst impossible. IT also ensures that currently industrialised nations are on the edge of a major recession with every spike in oil.
I reckon the US could be in major trouble domestically if Gas prices keep rising. No politician will survive the backlash of the irate consumer.
3) The increasing price and diminishing amount of oil should be screaming to us all that the world is about to call time on our lifestyle. Those who are waiting for technology and science to provide a panacea answer are living in cloud cuckoo land. Its time to have a genuine chat as people of the world about what the hell we plan to do when the black stuff runs out. Its no longer pie in the sky and it also is likely to hit poorest countries first. Those who are poorest will be the first to be unable to afford enough and so on.
4) Kind of related to point 1, taking on again from the book im reading by John Gray, resource wars are about to become inevitability again. Iraq may have had the veneer of spreading democracy and so forth but it will not be long before China, Russia, India, the US and Europe square off over land on central Asia and African and the era of empire is restored. Or human nature could take a startling turn and react before we reach crisis point.
5) In this race to consume oil the big winners should be those who have the oil, however the era of free trade and liberalisation has ensured that countries literally sold themselves to corporations. So well done to all those economic theorists for ignoring reality.
8) OR the price of oil goes back down. Many of you will cling to this possibility as the saving grace. It’s unlikely to occur though. The world requires 81million barrels of oil a day. Current refining capacity is in and around 81 million barrels a day. This is a tight margin and any event of any magnitude will push oil only one way. UP.
7) We are well screwed by oil dependency. FACT.
Still keep the faith, as I said I am no authority and these are only logical musings not hard fact. I really would like some replies to this one for above all else this will become the defining feature of 21st century international relations and social development.
Solutions to the world crisis on a post card to the usual address.
RR

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