Exponential Growth Economy and Oil
Posted by terres on November 27, 2007
The Death of Homo Sapiens Sapiens (Part 4)
Exponential Growth Economy and Oil: How much should oil really cost?
The system of exponential growth has failed civilization monumentally and on all counts! The runaway economy continues to exploit cheap oil to feed its malignant growth, while failing to recognize that burning oil (and other fossil fuels) is responsible for nearly all of the environmental catastrophes and the looming ecological collapse; and that oil is a finite resource, which is approaching depletion. This system of economy is susceptible to total collapse at any time, especially if triggered by shortages in the oil supplies, and is therefore unsustainable.
The Oil Paradox
The exponential growth culture has created a curious paradox:
A. If the global consumption of oil persists at current levels (let alone increased by 2% a year as the forecasts suggest), the ecological system and therefore its subsystem, the economy, would collapse. [Our projections show a partial but significant ecological collapse by as early as 2015.]
B. Both the economy and social system (civilization) would collapse as oil becomes scarcer. Any large reduction in the supplies of cheap oil (in the absence of a strong community management program) would result in the collapse of the economic system, forced by lower outputs and reduced mobility. Competition and conflict over the remaining finite resources of oil would result in war, possibly a global thermonuclear war, which would result in the collapse of civilization and all other systems.
We have reached an ecological threshold whereby any economic activity within the malignant culture of exponential growth triggers a host of destructive forces that are detrimental to the environment and human welfare. To steer away from the two equally undesirable scenarios, however, a two-step defense strategy is available:
Step One: To prevent the ecology from total collapse, the global supplies and consumption of oil must be reduced substantially. This can only work by increasing the price of oil and by placing a ceiling on the total amount of oil extracted globally.
Step Two: Having prevented the ecological collapse (we hope), the collapse of the social system can be avoided by removing the exponential growth economy from the picture and replacing it with life-centered community management program. To create a semblance of a sustainable future, the leading nations of the world must adopt a different system of economy, the Democratic Economy.
The need for a new system of community-based economy is paramount if, at least, some of our children are to have a future, and perhaps a chance of experiencing a fraction of the enjoyment and privileges of life to which they are entitled. Having bailed out of our commitment to the culture of exponential growth and disclaimed our false economic welfare we must switch to a system of life-centered economy where basic needs of human beings are integrated into the restoration of the ecological systems. Democratic Economy is economy for community designed to be sustainable and to meet all of basic needs of human being without causing further damage to the ecology. The human communities on a regional, national and global level assume guardianship for the entire living community including humans, other animals, plants and what is left of the planet’s natural capital and ecosystems. More on this subject, later.
There is a small window of opportunity, but its size is shrinking according to the urgency by which we act to stop the collapse of the biosphere.
Oil Price and the Elusive GDP
Trying to fix the price of a vital commodity like oil in the debt driven, gangster-ridden, ‘now-you-see-it-now-you-don’t’ exponentially growing system of economy is tantamount to creating an elastic yardstick. As the industry experiences a price hike in the energy supplies, it would increase the price of their goods by an even larger margin making the goods and services more expensive. This is probably not a bad thing for the environment [save for other inflationary factors and other human uncertainties] because many of the unwanted products and services would simply price themselves out of the market.
Our attempt is to highlight the value of oil as a vital commodity and not just to increase the price of oil for the sake of creating worldwide inflation to the detriment of the poor.
On a purely mathematical basis, all other prices, indexes and variables remaining equal, we believe a substantial increase in the oil prices, moving it closer toward its actual value, coupled with an agreed ceiling on the production, would reduce extraction, export and therefore the consumption. As a result, the environmental pollution would decrease substantially to the benefit of ecosystems and all life forms including human beings.
Total world GDP (purchasing power parity) for 2006 was an estimated 65 trillion dollars. In the same year the total energy supply worldwide was a staggering 507 exajoules (5.07+E20), about 150 times its pre-industrial levels, about 40 percent of which came from oil. We believe that without such massive surge in the energy supplies, the total world GDP would have been at least 150 times lower than the actual figure (assumption is made that the pre-industrial milieu could support the current world population of 6.67 billion).
It would be reasonable therefore to equate the value of the 31 billion barrels of oil pumped out of the ground in 2006 to 40 percent of the total world GDP, or 26 trillion dollars. Based on this figure the average price of each barrel of oil would rise to over 838 dollars.
65 trillion dollars x 0.4 = 26 trillion dollars [actual value of the oil pumped throughout 2006 as a share of the world GDP]
26 trillion dollars ÷ 31 billion barrels of oil = 838.71 dollars [minimum actual value for a barrel of oil]
This figure of course does not take into account other important factors.
First, the premium value of oil as a major fuel for transportation. Without oil, the producer and the service provider cannot reach the market and the wheels of industry would come to a grinding halt. No other fuel could currently claim a similar utility value. In 2006, oil accounted for at least 96 percent of the transport fuel use. Let us call this premium increase the ‘utility value.’
Second, the additional premium attached to oil as a finite resource. The remaining useable oil in the ground should last us much longer than the appointed decade or two, until the human community has decided to shake off its ‘Freudian feathers,’ adopt democratic economies and develop ‘clean,’ renewable sources of energy to replace carbon fuels, paid for from the current oil incomes. Call this premium increase the ‘continuity value.’
Third, premium for internalizing cost of the environmental damage caused by oil consumption (and other carbon fuels). To save what remains of our collapsing ecosystems, the ‘producer’ must internalize the cost of offsetting the environmental damage caused by oil consumption, and pay for the development cost of alternative human-centered community systems that are not dependent on oil. [The premium should increase for more polluting fossil fuels like coal.] The internalization of pollution cost at source must not provide governments the excuse to relegate, or abandon their duty of care to the environment. The producers must also be solely accountable for any damage caused by oil spillages during shipping and distribution. By adopting this ‘door-to-door’ care system, we also aim to remove last vestiges of purpose or ‘usefulness’ for the existing oil companies. Call this premium the ‘restoration value.’
Fourth, premium reserved to pay for supplying oil to poor nations/communities for their basic needs. To avoid any reliance on a trickle down system where the oil supplied to the rich would be expected to somehow miraculously reach the poor, the producer would reserve a premium to supply oil to the poor nations/communities through its door-to-door care system (discussed earlier)-the ‘Care Value.’
Fifth, the premium added for cost of monitoring the extraction ceiling and export. This premium would pay for the cost of monitoring the agreed ceiling placed on the extraction and export of oil on a national level. However, it is highly unlikely that the depraved ruling elite in countries such as Saudi Arabia and the former pumping stations now rent-a-citizen Gulf States would honor any agreements reached in this regard. It would therefore be necessary to impose heavy penalties on such regimes when they breach the extraction quotas. More on this issue later. Call this this premium the ‘integrity premium.’
As the additional premiums are added to the price of oil, the cost of a barrel rises above the 1,000 dollars reaching its true value somewhere below the 2,000 dollar per barrel mark. The proponents of cheap oil and the chrematists who profit from selling large volumes of oil at give-away prices would no doubt complain bitterly and try their utmost to block any such move. They would cite a host of reasons, especially inflation, which would decrease consumption (!) and bring the industry to a grinding halt thus affecting the elusive GDP (what’s so bad about that?)
Our answer to these elements is that reducing the supplies and consumption of oil, as noted earlier, is the only way to stop the exponential deterioration of the ecosystems and prevent an ecological crash. Everything else must follow suit. The time has come to sacrifice the interest of a handful of individuals in favor of saving life on the planet. Either we reduce our ecological footprint (immediate reduction is vital, especially in the consumption of fossil fuels and production of the deadly pollutions created as a result), or nature would decide for us, probably decimating our numbers, or worse, a total collapse of the ecosystems would occur.
We believe that by adopting a system of Democratic Economy on regional, national and global level that trades oil at or near its actual value, mindless consumerism and product fetishism would end. By producing only the goods that human community really needs (as opposed to the dumped merchandise perceived as necessary), the pressure on the Earth’s natural resources would ease. Lowering the volume of production would result in reducing the overall volumes of waste, and improving life quality.
We believe that in a system of Democratic Economy a slowdown in manufacturing would translate to less capital requirements, which in turn results in less energy needed to produce the machinery. By producing only the essentials and without the use of large capital, the system would create full employment opportunities.
Flying fewer or no passengers to the world’s ‘holiday destinations,’ or consuming fewer or no food products flown half-way across the world, the community-owned airlines and food production industries would help reduce the levels of CO2e greenhouse gasses and other toxic pollution significantly.
As the price of oil reaches closer to its actual value, fewer vehicles remain on the roads, hence creating less CO2e pollution. A system of Democratic Economy would enable us to redesign our car-centered population centers as human-centered communities, which would require far fewer vehicles to run. Human-centered communities provide safer, healthier and emotionally rewarding environments. They create more jobs, provide more varieties and require far less energy to manage, and are therefore less costly and more sustainable.
Building fewer roads and parking spaces, human-centered communities would free the land for local food production, creating reliable, healthy produce at affordable prices, which would ease the pressure to compete for resources.
Life as usual is no longer an option – at the current rates of decline our life support systems could collapse within our lifetime, probably even sooner than projected.
[Note: If we do not understand the message, then we must ask until we do because once we have understood the message only one course of action remains: Stop the Ecocide! Otherwise, we need to prepare something along the following lines to whisper in our children’s ears, every night before they go to sleep:
“Honestly, sweetheart, I kind of realized what was happening, but just didn’t have the time, incentive, or moral courage to do anything about it. Don’t you worry though, because ‘experts’ say when you grow up you can use matter/antimatter technology to travel to outer space and look for another hospitable planet …’]