Tuesday, September 05, 2006

The bane of rising petrostates and their coming demise

One of the most unfortunate products of the world economic order today are regimes that posses an inordinate amount of power (within the territories they control and internationally), simply because they have managed to secure control of oil that just so happened to lay underneath the ground they control. These regimes do not have to stimulate their societies to produce any sort of economic output of value that they can sell to the global market - why should they? They sell oil! In fact, all these regimes know how to do is to buy their place in power, to use their wealth to suppress their societies, and to enjoy an almost tragically prominent role in international affairs.

The biggest losers in this arrangement are the individual members of societies that live under these petro-regimes. Some of them may live comfortably, relative to global standards, but they live empty lives nonetheless.

Saudi Arabia and the gulf states would be nothing but the arid hinterland of a dramatically different Middle East. Whatever regime that ruled Iran would be a much more accountable one since it would depend so much more on Iranian society for its wealth as opposed to oil wells. Hugo Chavez would not exist, and the Russian state might have been forced to cave into the demands of Russian society. All of these realities may have been realized had the developed world not depended so critically on oil.

What reassures me though is evidence that this oil bonanza is only short lived. Tens Hundreds of billions of dollars have been invested in new infrastructure projects and upgrades, billions more have been invested in technologies that increase energy efficiency and provide economies with alternatives to crude oil.

Exxon Mobil's CEO recently claimed that he expected the demand for gasoline in the United States to decrease in the coming 25 years as a result of increased levels of efficiency. Technologies that convert coal to oil are beginning to get the kind of attention they deserve, and the money they need to become more economically feasible. Other technologies that convert oil shale to oil are also gaining prominence (the United States has the largest reserves of both oil shale and coal in the world).

All of these improvements and more will take years to yield any sort of tangible results. However, investors are already making decisions based on oil prices of $40/barrel, and prices have declined steadily over the past two weeks, to the dismay of some who wish for pertpetually high prices. And despite all the talk of unyielding competition between the United States and China, both powers have at least one common interest that they work in concert to realize: cheap energy for their growing economies.

The ultimate outcome is becoming clearer for all to see: oil prices will ultimately plummet. The petro-regimes that will survive relatively unscathed are those that are currently investing their windfall profits in non-oil related sectors of their economies. The petro-regimes that will crash and burn are those that are burning their petro-dollars in misguided dreams of regional military domination and economically unsustainable policies of buying popular approval.

Do I see the end of petro-regimes on earth? No. Especially in the short run, during which oil prices will remain volatile thanks to environmental and political factors. However, in the long run, I am beginning to see a clear and indisputable emerging reality that is very unfriendly to such regimes. I only hope is that this reality manifests itself sooner rather than later - i.e. in five, as opposed to ten or twenty five years.


Lirun said...


i am so in favour that you have no idea..

i vote green and believe that if we remember to love our land as much as we abuse it perhaps we might be destracted for five minutes and forget to hate our neighbours long enough for peace to prevail..

wishing a green peace to us all!!

go neo-flowerpower!! ;)

le maronite said...


In case you are unaware, the Green Parties of the world actually contribute to human misery by over-regulating and inadvertantly causing the subjugation of millions.

For over 30 years Greens have been fighting to eliminate nuclear energy, even though in comparison to all other major forms of energy including coal, oil, gas and hydro-electric its the most environmentally friendly. This "environmental success" has increased reliance on OPEC and continued to subjugate Arabs, Nigerians, persians and Venezuelans.

Its environmentalists in fact that restrict the use of DDT in sub-Saharan Africa, contributing to the death of about 2 million individuals annually from malaria most of them children. Inversely there is no account of any human death caused by DDT poisoning. Ever!

What Raja is saying (in his excellent way)is that market action - not environmental do gooders will eventually diminish energy imports from unreliable and unsavory sources (read OPEC) and develop more efficient use of fuel. (Sounds like George Bush's State of the Union speech for the last 5 years).

Lirun said...

le maronite

i think that is a gross over generalisation.. but i dont have the time to go into the entire segmented history of the green movement..

not all greens are irresponsible rent-a-crowd psychos with no job or shampoo.. there are some very pragmatic green parties like tyhe australian one for example that is now number 3 in the political spectrum of the country..offering effective ways to bring conservationsit methods into the mainstream..

typically groups that lack backing tend to stray into weirdo zones.. bring them into line and you find they moderate their ways..

anyway - whatever.. ;)

wishing us all peace in any event


Mr. Smarterthanyou said...

Greens would make things worse, because they resist all new exploration, they resist the building oof refineries, resist nuclear power, coal power.

Plus, they are socialist, if not communist.

Lirun said...

sounds like a well founded view.. so before i was a liberal and now i am a socialist communist.. heheheh

i should send this to my accountant.. my banker and my lawyer.. they will erupt in hysterics

your so funny mr gun lobby man..