Tomorrow's oil
Some may see a kind of poetic justice in the turmoil now besetting OPEC, whose action on oil prices a decade ago set in train a painful adjustment for the world's economies. But any temptation to be smug about the disarray in the 13-nation oil cartel should be stifled. Despite the benefits of a drop in oil prices, the blessing is a mixed one, and all nations will be better off if OPEC leaders persist in their effort to resolve their disputes and bring stability to oil prices. Predictability certainly is better than unpredictability.
Over the long run, of course, the declining prices for oil brought on by expansion of the total oil pool will be beneficial. Instead of importing so much costly fuel, nations will have more funds available for stimulating their now sluggish economies, and doing so without the danger of reigniting inflation. With more money in their pockets, American consumers, for instance, will begin making more purchases, thus giving a prod to economic recovery. The developing nations, which suffered most from the initial sharp rise in oil prices ten years ago, will be especially helped.
But potentially grave problems arise in the short term. Those nations that are heavily dependent on oil revenues for economic growth - Venezuela, Mexico, Nigeria - will have an even tougher time paying off their massive debts. International banks that have loaned so much money to the oil-producing countries may face outright defaults, threatening to throw the whole world financial system into chaos. Hence, if prices are to come down, a gradual decline is better than an abrupt one.
What should not be lost sight of, however, is the uncertainty of future energy demand and the need to plan ahead. The present oil glut is due in part to recession and, when economies pick up, demand will again rise. Some experts, in fact, anticipate that energy supply from all sources will meet only half the demand by the year 2030. Such projections may be overblown and some analysts reject alarmist scenarios, noting the enormous gains made through conservation measures.
Encouraging, yes. But oil is, after all, a finite resource and it is only sensible to make sure that it is conserved and its use intelligently limited to essential needs. Even those nations blessed with abundant resources, like Mexico, should not want to squander oil given their immense long-term economic requirements. One wonders, for instance, about the future of Iran, short-sightedly selling off oil in order to buy bullets. As for the oil-importing countries, it is evident how quickly the conservation ethic can be forgotten when fuel prices begin to fall - witness the eagerness of Americans to buy bigger cars again despite the latter's lower fuel efficiency.
So the effort to develop alternative sources should persist whatever the rosier picture now. After an overambitious plunge into the development of synthetic fuels, for example, the US government has drastically cut back its program. Yet, given the long lead time needed to develop advanced synthetic fuel technologies, it cannot afford to neglect this energy sector. National security alone dictates moving forward, for aside from the eventual exhaustion of oil supplies (and other fossil fuels) there remains the danger of becoming hostage to another politically motivated oil cutoff. Similarly, the US should continue to promote conservation as well as the development and application of such renewable sources of energy as solar power.
The disorder in OPEC, in short, is a reminder to the world not to become complacent about energy. There may no longer be a reason for alarm, but, given the political and economic ups and downs of the last ten years, preparing for any and every eventuality seems the better part of wisdom.
