ENERGY POLITICS


ENERGY IS GEOPOLITICS


As energy is crucial for each facet of production and society, is it a very crucial facet in prosperity of nations. Price rises of energy frees the entire economy (as energy 'takes it all'), thereby draws the banks down and dries the fiscal system and by that all jeopardise the governmental structures. This delivers a huge challenge to nations that are a) energy inefficient and b) have a fuel based energy system. In the old fuel based energy model there is huge difference in national perspectives based on that fact of a nation have energy fuel surpluses or energy fuel deficits. There's a direct link between the USA hitting her top of oil production (US PeakOil) in 1971 (only one year later than M. King Hubbert's in 1956 made exploration curve) and the Nixon Shock (unilaterally cancelling the direct convertibility of the United States dollar to gold) in 1971. The year 1971 marked the turning point in global dollar valuation and US global dominance. Producing is getting richer. Importing is getting poorer. Kissinger has fixed this problem artificially in 1972-74 by making some crucial oil/currency agreements with Saudi Arabia within the U.S.-Saudi Arabian Joint Economic Commission, these guaranteed that the oil market for the huge Saudi Arabia market share would be still nominated in USD even the USA where no longer the main oil supplier of the world (as they where before 1971). The old fuel based energy system drains the wealth gradual out of energy fuel deficit nation. The old fuel based energy system just transfers each year steady a certain wealth volume to energy surplus nations. Abandoning the road we all started to take in the 70ties had it's price. We should never let a Hollywood actor draft our economic future. Unfortunately we did and now we must pay the mortgage on both our financial system/party and energy system/party. We have partied a dream on credit. We have mortgaged our future and it's getting pay-time. We have not done any energy transition what ever. We're just a far as we where end of the 70ties. Now cheap energy is over and we have not build alternatives. There is certain value economies can pay for energy fuel. History (July 2008) has shown that $ 147 maybe is a too high price and such price levels poison our economic systems. This does not mean that oil prices can rise to $ 200 or beyond, nobody knows the maximal price of a barrel of oil. As demand grows and supply declines there will be market tensions that not can be solved by the price mechanism, as that would deliver too high energy fuel prices. On top of the market mechanism of supply and demand than a granting model will grow. Energy surplus nations will sell there energy fuel to friendly nations. This is where the bullies of the world will hit a wall, as nobody really likes the bullies. This process is (just in talk, not in action) already growing in South America. Nations that have military power and will not got energy fuel allotment grants will go to war. Direct in case of stable not willing to supply nations or indirect (funding resistance movements) in case of unstable not willing to supply nations. From the perspective of an economist the old fuel based energy system has many downsides: from a declining currency value that effects savings and pensions, by fuel supply availability uncertainty and fuel supply line uncertainty, to economic negative trouble in unstable regions. Exporters get more rich, importers gets more poor. This is not an opinion, just some elementary school math. Exported wealth is gone, it' can not replicated itself any more, nor can give economic future security. It just drained out of the system. For the specialists in economic statistics: this drain is commutative (year after year, after year) and delivers an exponential (hockey stick shaped curve). The history of the future will name the start of the fall of the Western World in just one word: Reaganitis. An Hollywood actor was our future designer. We had to know that it was a dream, but we like dreaming too much to escape out of it. This political movement of 'let's party now, and to hell with our children' marks the beginning of a 30 year period in which we wasted almost 50% of the economic to explore resources and demolished our credit system and currencies to the point of breaking. Due extending of or credit system we could hide the effects that rising energy prices had since the early nighties. The price is a structural economic crisis, a structural financial crisis and a structural governmental debt crisis. On top op this the phenomenon of emerging markets start to came to the surface of the world economy. The West laughed on it out of misplaced neo-colonial superiority. The West was and also will be the better part of mankind. But both China and India delivers each year more Ph.ds than Europa and the USA have in total. Everybody who has visit Shanghai is cured in one day of this misplaced western superiority pink painted dream. Emerging markets started not only to deliver to the global markets. They started to buy resources also. Based on an 10% annual growth figures. To be clear. This is about limited finite resources. Everybody who understands that supply and demand makes the market prices understands that huge price rises are inevitable. The race for resources has started in the '90ties and gets more traction each year. A race that gets more tensioned each year. The West used massive oil supply to to global markets brake the economic back/foundation of the USSR. The west won the Cold War by oversupply of oil to the global market, but but lost its future resources. A very similar case to funding the western funding of the Afghan Mujahedin in their fight against to wrong annexation of the USSR of Afghanistan, which delivers the world a new type of violence. The new energy system doesn't need foreign fuels. The new energy system reduces global tensions regarding energy very much. Global tensions often lead to global wars. We had two if them. We had enough of them: they're just a waste of labour and resources. Wars are contra productive. A choice for renewable energy is a choice for lees tension and more peace. Everywhere there are fossil energy resources there is tension. Only the new energy model can assure global tension reduction. Currencies are also geopolitics. Energy and currencies are very much interconnected. Energy is Geopolitics is a very valid statement.


Author: Gijs Graafland


Back to index page of Energy Economics | Energy Politics


Download the full Energy Economics report in PDF