Oil crunch

We had a credit crunch recently, and there may be another potential ‘crunch’ on the horizon that could jeopardize the global economic recovery: oil crunch. Recently there have been a few articles on this issue. Some of them belong to the alarmist school whose basic argument may be summarized as ‘we are going to run out of oil very soon, and we’re doomed’. Others are also quite pessimistic about the intensification of the competition to secure oil in the future. Some argue that we can drill our way to as yet unknown oil fields. There are even those who think these figures are cooked up by a weird coalition of scaremongering oil-producing countries and environmental groups. In any case, oil, and therefore everything, will become dearer. Oil prices had been going up before the crash, and is creeping upwards again now.

We all know that oil is a diminishing resource. Even if there are reserves in inaccessible or difficult areas, or not yet known to us, extraction of such oil will inevitably be more expensive. This spells serious trouble. The world we live in cannot function without oil and products derived from it. I wonder how many things surrounding me on my desk could have been produced or transported or retailed without any oil. By my reckoning, none.

There is no way that the current oil-dependent world could go on as it is. With increased prosperity in countries such as China and India, demand certainly looks to increase than diminish, and it is absolutely imperative to free the economy and society from their dependency on oil. It is a problem that is bigger than individual societies and states, and unless we can come up with something clever soon, we may really be doomed.