February 2, 2010

The Economics of Oil … Life Without Oil

For those “Flatearthers” that still fail to see the madness in our society’s continued urgency to burn every last drop/bit of fossil fuel left on/in the Earth, let me try an economic argument.

For the few that have oil, i.e. those few countries that sit on massive reserves of the black stuff, it does not always lead to nirvana – show me a Garden of Eden story based on the proceeds of oil, where the wealth generated has flown into Government coffers and has in turn, been reasonably distributed or allowed to filter down– none? For the rest of us, oil will continue to burden consumers, industry, agriculture and governments alike. Certainly, continued sales of oil leads to increased taxation flowing into the Department of Finance/Exchequer but this only serves to fuel (pun intended) an artificial distortion of trade, as those that by and large sell us the oil, purchase little of what it is we make in return (most oil seems to be discovered in remote and lowly populated areas in the World – think desert!). We must therefore wean ourselves off the addiction that is oil. Every spike in oil prices (notice at how the cost of crude oil jumps at every piece of positive economic data emanating from the US in particular?) leads to unprecedented levels of global inflation. If oil and the cost of a tank of fuel was the only product impacted then disaster could be mitigated, but all sectors of society are also so heavily dependent on oil, including industry, food production and transportation. Society (and by that I mean individuals) need to accept this fundamental point in order for meaningful change to occur.
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