The price of oil is up 53 percent over a year ago, creeping up now toward the mid-$90-range. The news media is still AWOL on the subject. (The New York Times has nothing about it on todayâ€™s front page.) The dollar is losing a penny a week against the Euro. In essence, the American standard of living is dropping like a sash weight. So far, a stunned public is stumbling into impoverishment drunk on Britney Spears video clips.
Though I would argue that a significant chunk of the price rise is based on the thrashing of the US dollar, it certainly does and will have plenty of other pressures.
The political assumptions one hears are the most astoundingly naÃ¯ve and ridiculous, especially the ones that involve other countries and our relations with them. NY Times followers no doubt believe, along with Tom Friedman, that the global economy is now a permanent fixture of the human condition, and that soon it will transform itself into a colossal engine of â€œgreenâ€ (i.e. benign) commerce. Friedman and his followers tend to forget the second law of thermodynamics when spinning their fantasies of a world that can harmlessly manufacture and market an endless number of plastic salad shooters from one side of the planet to the other without incurring any losses to the health of said planet.
Very true, a flat world depends on cheap oil to remove the impact of market distances, and place the focus on labor costs instead. Such a low cost of transport has negative effects.
My own assumptions are somewhat different. I think weâ€™re likely to see a lot of nations scrambling for survival, initially manifesting in a contest for the worldâ€™s dwindling supply of oil (and oil-like substances). For instance, when viewing the globe, few people consider that Japan currently imports 95 percent of its fossil fuel. Japan has been a â€œgood boyâ€ among nations since its episode of â€œacting outâ€ in the mid-20th century and has enjoyed a long industrial prosperity since then. But what happens when there is not enough oil in the world to be allocated rationally by markets among the powerful nations?
The severity of the response of course depends on the speed and impact once demand passes supply. But even best case scenarios, where prices gradually keep rising, will have some major consequences for the world stage. There is no deus ex machina in the real world to change our dependencies and assumptions over night.