oil junkies

It feels especially frustrating when we hear, yet again, that high oil prices are jeopardising economic recovery. I am old enough to remember the mid 1970s when the quadrupling of oil prices, following the Yom Kippur war in Israel, caused a major economic slump. We do not seem to have learned much since then.

It has often been said that the West is effectively an oil junkie. We seem unable and/or unwilling to accept the cold turkey and find alternatives. Cost, is, of course, the reason that is presented. All other forms of energy protection remain more expensive than oil.

So, here we are again and once again it is the cost argument that is winning the day. Wind turbine energy, in particular, is constantly claimed to be economically not viable.

The fault in this logic is that economists are simply underestimating (or ignoring altogether) the true costs of our dependence on oil. The Arab Spring and the worsening of tension in Israel have once again brought this into sharp focus. The West remains encumbered by its need not to offend Saudi Arabia and the gulf states and this comes at a huge cost. Our involvement in Iraq and Afghanistan can also be traced to the West’s overwhelming need to maintain stability in the Middle East in case oil supplies are disrupted. It is difficult to put a monetary value on paranoia, but that is what this really amounts to. And it is extremely debilitating, not to mention costly.
This argument about ‘true’ cost does not even take account of environmental issues. If we add environmental cost and – shall we call it ‘military and diplomatic cost’ ? – together, we can see that oil is not as cheap as its seems.

To stretch the metaphor, the junkie may only count the cost of his addiction in terms the how much money he needs to ‘score’ regularly. He will not count the cost to his health and the shortening of his life. He is too far gone for that. The West is still in a position, unlike the junkie, to make some rational calculations.

Now we have a great opportunity to mirror the way in which the modern economies escaped from the Depression of the Thirties – by waging war and making the investments necessary to do so. But this would not be a war amongst ourselves, but against carbon. This investment has four huge dividends:
1. To the environment.
2. Never again will we be beholden to unstable regimes.
3. It will, of course, create large scale employment.
4. We can get out of the Middle East.

The rate of return on this investment looks pretty attractive from where I am sitting.




http://www.hoddereducation.co.uk/Colleges/Government---Politics.aspx?mRef=CNM01.