Introduction:
Long have it known that oil has been one the most important commodity in the world. In fact, the rise and fall of the price of oil and gas in the market dictates the global economy. Oil as a major factor in the global aspect, has been the root cause for most of the world history’s political strife, wars, hostilities, and cause of economic downfall, such as the great depression. Oil is also one of the bases for the country’s economic status, putting those sources of conventional oils on the pedestal and on the more advantaged stage in the world economy. While it is true that “oil is the excrement of the devil” in the past decade, where global conflicts, economic downfalls, and political strife are rooted to oil, it is still an inevitable fact that the significance of oil in the global economics is very high. Although there is a projected decline in conventional oil, oil would still be considered as the lifeblood of global economy.
Oil Economy
The consideration of oil as an excrement of the devil has been popularized by Perez Alfonso, one of the founding members of OPEC. OPEC is a supranational organization that was created in the 1960 to ensure that there is regular supply of oil and to stabilize the price of oil in the global market. It also ensures that there is fair return for the investments of companies in the petroleum industry. Basically, there are 12 states that are included in OPEC (Organization of Petroleum Exporting Countries) that includes: Angola, Algeria, Iran, Iraq, Ecuador, Libya, Saudi Arabia, Venezuela, UAE, Kuwait, Nigeria, and Libya. Since the start of the organization, these nations have been operating in the fixing of prices of oil. With the leadership of Saudi Arabia, this organization is calling the shots for the oil price market for the past four decades. Cartels should be regulated so as to maintain stability in the economic societies. OPEC has been dictating the oil prices, including the 1973 jacked up price for oil causing economic turmoil in various parts of the world. During that time, consumers all over the world greatly suffered. Juan Pablo Perez Alfonso then stated “I call petroleum the devil’s excrement. It brings troubleLook at this locura- waste, corruption, consumption, our public services falling apart. And debt, debt we shall have for years” (The Economist).
Oil is a curse in some ways. Most of the developing countries struggle due to their status in the oil reserves, and their great dependency to the imported oil coming from the Middle East. The countries that are richly blessed with the natural reserves of oil also struggle with misery-induced wealth consequences of transparency, democracy, and public institutions that are effective in responding to their citizens. There is also the constant need for prudent management of public finances, maintenance of macroeconomic stability, investments for windfalls abroad, economic diversification, rain day funds set up, and ensuring that the local currencies are at level and do not reach extreme prices.
At the statement of Alfonso calling oil as excrement of the devil and a curse has caught the attention of various economists and political scientists worldwide. They associated the slow movement of the economies of the rich source countries to this concept when they compare the economic growth with the countries ha are relying on the imported oil. As noted, one of the common traits of these countries is that they have exchange rates required to stimulate the importation and exhibit the exports of other things except the primary commodities. Their leaders have acted upon diversification of economies but it is rarely that these investments succeed due to the extreme stunts in the exchange rates in terms of tourism, manufacturing, and agriculture sectors (Naim). On top of the economic challenges of these countries, there is also the threat for political power concentrations in these nations. There are various reports and arguments stating that oil worsens the poverty of these nations where democracy development is stunted and aggravating civil wars in some cases. It is also observed that oil nations have higher tendencies to maintain large armies compared to other countries that do not have oil reserves of their own. There are also observations for low literacy rates, lesser life expectancy, and slow measures on the aspect of human development. Furthermore, corruption is very prevalent with biased awarding to foreign oil firms and external contracts (The Economist).
The impacts of oil reserves to nations have burdened these nations. However, along with these consequences, it cannot be denied that they have gained greatly in view of the economics. Oil is undeniably the bloodstream of the global economy. It has fueled the population and the various industries of all nations worldwide supporting the economic growth of countries for more than 150 years. Along with the increase of human population, the growth of the industries also increased thereby increasing the energy demand for global consumption. In the global economic expansions of major countries, and the constant growth of the developing countries, there is also the attached growing need for supply of low-cost energy. The fossil fuel and gas as of the moment still ranks as the primary source for the consumption of energy sectors for countries around the world. Despite the issues of the political climates, transport issues of oils, and other political factors associated with oil supply and demand, there is still the reality the world still needs fossil fuels and natural gas for the day to day operations of industries, vehicles, and daily commodities of nations around the world. It is important therefore, to acknowledge the fact about the oils increase in demand in the coming years.
The oil production in nations worldwide has already reached its peak moments. That is, the global production of oil has reached the maximum point on the curve line projected for the growth and progress of oil. There is no running out of oil though. For over fifty years of researches, it is evient that the oil extraction of the oil producers around the world has reached their maximum level referred to as the “Peak Oil”. This is the point where oil extraction is at the highest, possibly maintaining this production for years, and would slowly experience an irreversible decline. The oil reserves are not in lack and would not run out as projected by some engineers; the issue rather is the lack of further growth of oil production. The recovered oil has already attained 95% and that there is a reasonable degree for these resources to reach into its terminal decline. When half of the oils would be recovered from the oil well reserves and that the world has already consumed half of the total reserves and yet still continue to dig and drill for oil, then there is a point that is coming near the production plateau. The consumption of oil has been multiplied four times as it is discovered. There are no significant discoveries for new oil reserves since the year 2002. There is no amount of technology can alter the fact that the major oil fields have already been exploited. If the gap between the oil consumption and oil production continues, then the situation is indeed critical (Peak Oil). Chevron and Exxon has admitted the fact of the possibility of increasing demand for energy and declining of supplies. “Energy will be one of the defining issues of this century. One thing is clear: the era of easy oil is over. What we all do next will determine how well we meet the energy needs of the entire world in this century and beyond” (O’Reilly).
The peak point of the oil production is reached when the extraction becomes difficult and expensive. There are no substitutes for cheaper oil extraction that has been installed in the current technology. The terminal declines are expected at around 2012 with the reasons that most of the production fields are already depleted and discoveries of new oil wells are going slow. According to the International Energy Agency in Paris, there is an estimated need to add around six new Saudi Arabia by 2030 in order to cope with the declining oil production. The peak period for Natural gas is expected around 2010 to 2020. The contribution of renewable energy sources are also very low to cope with the expected demand of energy in the future. The projected decline in the fossil fuel has a big impact to the economy as the world would be forced to live in and energy budget. There would be various cycles that would affect the economy such as price spikes for various commodities, economic destruction, supply destruction, and price spikes again . The global economy and lifestyle of humanity would then be affected in the long run (Nelder).
Conclusion:
The projected shortage for energy and oil in the future is a very serious crisis that the world may encounter. Evidently, the supply of oil in the global market continues to bring life to the global economy. Any issue related to oil would surely cause a destabilization to the worldwide market creating massive impact to nations around the world. It is important therefore, that humanity should be prepared for the coming days when there would be lesser oil that would be extracted from the earth’s natural reserves. Theoretically, the natural resources coming from the wind, sun, geothermal, and hydro sources can suffice the total energy requirement of man. There is just a need to explore these alternatives to prepare for the incoming decline of conventional oil supply. The countries belonging to the OPEC which are considered as the main producers of oil in the world are expectedly affected with this phenomena. They would cease to experience the thought of oil as excrement of evil as they too would feel the scarcity of energy in the near future if they would not be prepared for this. But still, oil would be a basic commodity in the future that would dictate the stability of the global market. Oil being a bloodstream of economy is still a reality in the past, present, and the future.
References:
Naim, M. “The Devil’s Excrement: Can Oil-rich countries avoid resource curse?” FP Magazine.
(2009). Web. 3 April 2016
Neldr, C. “The End of Fossil Fuel”. Forbes. (2009). Web. 3 April 2016
O’Reilly, DJ. “Chevron Corporation”. Oil Decline (2016). Web. 3 April 2016
Peak Oil. “Peak oil Info and Strategies”. Oil Decline. (2016). Web. 3 April 2016
The Economist. “The Devil’s excrement: Is oil wealth a blessing or a curse?”. The Economist. (2003). Web. 30 March 2016
