September 20, 2023 - 7:20am
Oscar Wilde is said to have defined a cynic as a person who “knows the price of everything and the value of nothing”. While we can’t be sure of Wilde’s position on global energy markets, contemporary policymaking in the energy sector suggests that his definition would fit here, too.
Although the International Energy Agency continues to publish reports about how peak oil demand is just around the corner, reality stubbornly refuses to comply. Saudi Arabia has just announced its intention to continue its one-million-barrel-a-day cut until the end of the year, which constitutes about 1% of daily global oil use. The international crude benchmark Brent, however, has risen around 20% this month, demonstrating how inelastic the demand for oil truly is.
If energy is the only real global currency — because nothing can get done without it — then oil is the master currency. The price of oil is one thing, the value quite another. One barrel contains the same amount of energy as 25,000 hours of human labour — or 12.5 years of physical work by an average human being.
In one way or another, we encounter oil-based products every day. We do not use crude in its raw form, but instead in the myriad of things that can be made from it. Over 6000 different products are based on this unique fossil fuel, and if the price for crude oil goes up, so will the price of everything we need it for.
Food prices, for example, are bound to increase over the next few months as the price of diesel rises faster even than that of oil. Diesel, however, is the lubricant that keeps mechanised agriculture and supply chains running: if supply becomes tight, higher prices will be passed on to consumers.
It might seem counterintuitive, but what we pay for our food is directly connected to the global oil market. When Western politicians like Justin Trudeau call on grocery chains to reduce prices, this clearly reflects their lack of understanding as to how the modern oil-based economy works. Both farmers and transportation companies have to pay more for their fuel, a direct consequence of Western policies which continue to claim that oil can easily be substituted by other means.
As we are about to find out, it will not be that straightforward. For decades Western politicians have refused to make investments into refining capacities, leading to a growing crunch in necessary distillates like diesel. If one expects renewables to come to the rescue, then it’s time to think again: the offshore wind industry is on the verge of collapsing, while solar and electric vehicles are encountering problems as well. As it turns out, even renewables need oil, for everything from lubricants in wind turbines and plastic in EVs to the massive amounts of diesel needed in the mining industry to satisfy the renewables sector’s hunger for minerals and rare earth elements.
The next few years will most likely demonstrate that we are still far from peak oil demand or supply. Whatever the price of the resource, its value to modern civilisation will be almost irreplaceable.
Ralph Schoellhammer is assistant professor of International Relations at Webster University, Vienna.
Raphfel
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SubscribeIt must be so annoying for the eco zealots when reality just won’t comply with their ideology.
“energy is the only real global currency — because nothing can get done without it”.
Using that criterion, COFFEE is the only real global currency.(Though, admittedly, you need energy to heat the water.)
This is a good article. I am usually in favour of short pieces, but I would have preferred this one to be more in-depth, especially when the article is classified as “Analysis”.
You can wish it away, you can pretend we don’t need it, you can sue oil companies into oblivion, but it ain’t going away anytime soon.
There was a period ‘pre-Covid’ when the media all chattered about that other feature of our economies ‘peak coffee’ and likewise promised that it was just around the corner.
But as the high Street continues its slow collapse, there seem to be lots of new coffee bars. And the MSM has gone strangely quiet.
What about Ash-die-back ? There’s a huge ash tree outside my block that hasn’t popped its clogs yet.
And there’s always peak population……
“For decades Western politicians have refused to make investments into refining capacities” – can someone explain why politicians have to build refineries – I thought that the fairly wealthy oil companies did that.
Good point but I guess it’s the politicians who make the conditions under which refineries operate, and usually make it prohibitive to build new capacity in European countries.
Its generally private money, but politicians decide what can be built, just a few days back politicians in Ireland managed to stop a private company building a LNG terminal on the West coast of Ireland. We really need this for energy security, but the clowns in the Green party don’t care
Unfortunately building something that will benefit hundreds of thousands or millions across the country and world if they knew about it is trumped by noisy nimbys and eco-zealots as far as vote seeking politicians are concerned. The politicians are again unfortunately the gatekeepers to building anything significant.
Everybody wants their lights to come on when they flick the switch but no-one wants a power station at the end of their road.
They really don’t. Same situation in Scotland, theyre borderline deranged.
This is actually a huge issue that would be worth exploring in more detail. It’s been neglected for decades actually, so it’s more than just an anti-fossil furl thing.
Superb article – right on every count.
Because people are using a lot of it.
Norway has gone all in on electric cars, so in theory, their oil use should decline, but AFAIK they use just as much oil as ever. AFAIK this is because the population is growing (foreign imports)
People pushing net zero also believe in open borders. I don’t believe net zero is possible, but if you keep aggressively growing the population, its even more pie in the sky
Norway is actively searching for new oil – which is why Orkney wants to secede from the UK and become part of Norway.
Orkney is the logical endpoint of localism. London politicians blamed the bureaucrats in Brussels. Scottish politicians blame the bureaucrats in London. Orkney politicians blame the bureaucrats in Edinburgh.
At this rate, we will end up back to family-owned farmsteads.
Because of.physics. next?