Over on my other site CheersandGears.com, I was having a conversation about the coming oil bust and our need to push now to find an alternative to oil as our primary fuel for transportation. My jaw dropped with this response:
Free trade relies on entrepreneurs using their creativity to make a lot of money. Nothing about the idea of relying in the ingenuity and the allocation of resources through millions of voluntary transactions is based on oil. If oil were actually running out, futures prices would shoot up and there would be a large profit opportunity to invent alternative energy sources, and companies a large incentive to spend their money wisely on the best technology. The free market will save us from any impending disaster created by the free market.
Wait…. what?! First off, we don’t have a free market on oil. The vast majority of oil production is controlled by an oil cartel who has a direct interest in lying to the consumer about their supplies so as to prevent a mass switch away from their product.
Someday I fully expect to hear about an area in Saudi Arabia where they are having trouble with some wells. “Just a little snarl!” declares the Saudi oil minister (looking vaguely like the Iraqi information minister), “We’ll have production back online in a week”. That week turns into a month… and then a few more wells pop offline… still “We’re ok! We have 260 billion barrels in reserve! Keep driving your Hummers! We’ve had a couple setbacks but we’ll be back online on Wednesday”
Two weeks later, the same thing happens in Kuwait.
Oil shoots up to $300 a barrel which makes it about $15 a gallon of gas.
Global shipping grinds to a sudden and catastrophic halt. Suddenly and without warning, it is less costly to make goods in the U.S. than it is to make them in China and ship them half way around the world. The only problem is: No production capacity of any meaningful amount is available in the U.S. anymore. 4 billion Chinese, faced with sudden unemployment, begin rioting in the streets. There is a Tiananmen 2.0, only not as pretty.
Conspiracy theories abound.
Republican’s propose, on national TV, invading Saudi Arabia to take the oil, but with China in turmoil, there is no way to fund such an invasion.
And so the economy collapses into a depression that makes 1929 – 1941 look like a walk in the park. Multiple countries default on their sovereign debts, this collapses just about every bank on the planet. I won’t even go into what happens to the stock market… that should be fairly self evident at this point.
Eventually a few countries find something to fight over and we all go back to war.
But sure….. we’ll be saved by “The Market”
“The Market” doesn’t have foresight… and it doesn’t have the ability to tell if someone is lying…. and even when it’s blatantly obvious they are lying, “The Market” ignores it if it’s financially inconvenient (need proof? look at the blatant lying in the mortgage crisis)
Switching off oil as a fuel cannot be left up to market forces alone, because when it becomes absolutely necessary to make that switch, it will already be too late.