Nine years ago oil was at $10/barrel. Now it’s $118+. What gives?
Paul Krugman, economist and New York Times columnist, addressed this in his column on April 21. He went to the edge of fully acknowledging the resource crisis we face, then stepped back:
The global surge in commodity prices is reviving a question we haven’t heard much since the 1970s: Will limited supplies of natural resources pose an obstacle to future world economic growth?
How you answer this question depends largely on what you believe is driving the rise in resource prices. Broadly speaking, there are three competing views.
The first is that it’s mainly speculation — that investors, looking for high returns at a time of low interest rates, have piled into commodity futures, driving up prices. On this view, someday soon the bubble will burst and high resource prices will go the way of Pets.com.
The second view is that soaring resource prices do, in fact, have a basis in fundamentals — especially rapidly growing demand from newly meat-eating, car-driving Chinese — but that given time we’ll drill more wells, plant more acres, and increased supply will push prices right back down again.
The third view is that the era of cheap resources is over for good — that we’re running out of oil, running out of land to expand food production and generally running out of planet to exploit.
I find myself somewhere between the second and third views.
This is strong language for a mainstream economist. While he doesn’t go as far as I would like in acknowledging the finitude of the Earth’s resources and the absolute necessity for transitioning to a sustainable economy – I am somewhat heartened to hear this discussion in the Times.
This reminds me of the (appropriate) analogy of what it takes to turn a supertanker around in the middle of the ocean. It doesn’t turn on a dime, but takes MILES to execute a turn because of its huge bulk and great momentum.
That’s what we’re dealing with. As eager as many of us are for fundamental change – it isn’t going to happen overnight.
Patience is a virtue.
Two great books on the realities of fossil fuels and the need for renewable energy: