By Mathew Maavak
Oil prices are rising again, with analysts wondering if the all-time record of $75.35 per barrel, notched on April 21, will be surpassed this week.
All the usual earth-shattering parameters are missing in this latest episode. International enfants terrible from Iran to Venezuela, along with their nukes and threats of supply cuts, still remain looming in the distant market horizon, causing a semi-permanent markup in global crude prices. But the threshold has not yet been crossed.
In the absence of such immediate "grave threats" to international peace, there are no "surprisingly larger" U.S. gasoline reports this time either, along with their helium-like psychological ability to relief market jitters each time a critical mass is reached somewhere. There is a stalemate on the Iranian front, and in the case of Hugo Chavez, his polemical repertoire has already run out of gas and originality.
So, what gives now? For a glimpse into our overstretched global supply lines, think of seven tankers blocked by an oil spill along Louisiana's Calcasieu Channel last week and refineries that couldn't process the crude trapped in their hulls for 10-odd days.
That sent enough ripples across the equator, and they are returning in time for the big bang, gas-guzzling July 4 rides today.
Was there ever a time when the American Independence Day gifted million dollar checks to its nemeses?
One nemesis -- on another front -- is China. Its economy is expanding phenomenally, notching a 10.3 percent growth in the first quarter of this year. This will only add fuel to simmering oil prices worldwide.
Greater demand from China will intensify a fatigue-immune resource competition, and expect some ugly geopolitical maneuvers alongside ballooning prices in the months to come.
Sooner or later, come what may, there will be a showdown.
There is more bad news. China is plunging headlong into energy efficiency, and those who think this will save planet earth of some of its precious, dwindling natural resources should do some real hard thinking again.
Greater efficiency in the production and consumption processes should naturally lead to decreased demand and competition over raw materials. Unfortunately, this is not the case. Fuel efficient cars, streamlined industrial production, and creature comforts paradoxically spark greater demand for anything encapsulated in the four letter word: MORE.
In an age where cell phones have a lifespan approaching that of a mosquito-repellant or a toothbrush, our industries are revving in tandem with the fuel fed into it. More fuel for more industries for more products. This is known as the Jevons Paradox.
It is not just China that wants more. The developed world wants more too. The accoutrements of the modern world keep aggregating in a manner that results in greater demand and throwaways. The days when autoclaves were used to sterilize surgical instruments are slowly disappearing; in its stead are disposable plastic suturing tools and knives, all because one industry lobby pounced on a sterilization incident turned tragic. Aren't humans prone to mistakes? Perfectionism leads to wastage. Sanitized trade regimes lead to starvation.
The latest round of WTO talks, aimed at removing agriculture tariffs and opening global trade, recently broke down due to resistance from the Third World. The Third World wants the European Union and the United States to dismantle agricultural subsidies for domestic farm produce, and in the process render products from developing nations cheaper.
Nothing happened at this exercise in negotiations.
The Indian Commerce and Industry Minister Kamal Nath reportedly walked out in disgust. India and China, though, have little to fear. With their huge markets, expertise and geopolitical clout, they are in a far better position to lock and secure vital raw materials.
During the talks, hardly any questions were asked on how impoverished nations will cope with high oil prices. This will not be a problem for China, which has stocked $1 trillion in U.S. Treasury securities -- instant petrodollars that can grease its sweatshop industries while bankrupting rivals abroad. When competition intensifies -- laissez-faire trade regime or not -- impoverished nations will be further disadvantaged. Oil, copper, zinc and other raw materials are finite resources that are ripe to be ripped from native soil.
Energy security somehow doesn't blip on the trade regime radar when it should, in fact, have fluttering red flags lodged on it. All we get are tangential arguments that miss the bulls eye.
The prodigious energy expended on ethanol efficiency debates at research institutions are not matched by a primary school curricula on energy savings. There is no EQ that reads energy quotient. Don't blame the kids when adults chug along CO2-belching jalopies instead of public transport. And adults go on to elect leaders who keep the energy quotient at status quo ante, and who promise MORE.
In the end, can we keep up with such insatiability? Historically, no developed nation or political heavyweight has ever contemplated self-imposed austerity. That is possible neither in developed nations nor in emerging markets like China and India, which take up two fifths of the global population. The sales pitches here, that can run into exponentials of billions, do not make this a possibility either.
When energy supplies cease to meet demand, a resource war begins. They will be couched in quasi-nationalistic or religious overtones; all of which mask the inability to balance supply with demand.
Resource wars, of course, lead to outright conflict, as anyone with a historical quotient can testify.
In the meantime, those seven tankers have already made it to their Citgo destinations in Louisiana. The July 4 strain on gasoline will be over in a day or two.
So, what's next to rattle our global energy bank?
Published in The Korea Herald on July 4, 2006
Most of Mathew Maavak's commentaries can be read here or visit the Panoptic World homepage.