what would happen if oil supplies could not be guaranteed?

What can be read from the latest goings on in the ME is that absolutely nothing is guaranteed anymore. Political alliances that have endured for decades have ended and ended abruptly. This effectively means that the fragile stability in this region has also ended. The entire ME scenario that was already very complicated due to the existence of Israel becomes even more complicated politically. America’s influence in the region is now dependant on democratic movements that assume free and fair elections. The likelihood of this occurring is remote indeed if Iraq and Afghanistan are any example. What could be more astutely observed is that America has made some very bad strategic calls indeed. Saudi Arabia has huge influence in geopolitical terms simply because of the fact that it controls the balance of power in regard to oil supplies. While America is so dependant on importing oil to maintain its lifestyle; it makes absolutely no sense strategically to upset such an important ally. It is now being reported that Saudi Arabia is making noises that its political support in the region is shifting to more dangerous allies such as China and Iran after President Obama deserted Mubarak in Eqypt.

This all begs the question of what would happen if oil supplies could not be guaranteed and shortages should accrue for whatever reason. Undoubtedly prices would shoot up leaving more than a few countries at risk of severe economic collapse. It does not take a terrorist to figure out that the best way to derail any economic recovery would be through high oil prices that were sustained over a prolonged period.

Say hypothetically civil unrest broke out in Saudi Arabia and protestors sabotaged many oil facilities in the kingdom. Civil unrest ruled and during this time Saudi Arabia stopped exporting oil. In other words global oil supply was unable to match current world demand for a number of years.

Workers though out the OECD would begin to suffer the curse of rising prices that were not being compensated by rising wages. Indeed the rapid demand depletion of all manner of products and services would put extreme pressure on all manner of businesses to cut costs in any way they can to starve off bankruptcy as revenue collapsed.

A repeat of 2008 would occur however this time around the prognosis is not so good. As more and more people struggled to make ends meet; defaults on loans would increase. Soon banks would come under pressure as property prices fell. Governments would be required to come to the rescue to avoid a total financial collapse. Government debt would once again explode however this time around it may not be so easy to borrow.

Governments in desperation would begin to print money and in a short time; inflation would be completely out of control. Filial currencies would loose all credibility and soon the ability to pay for imported oil is not guaranteed.

Should this occur in a modern economy dependant on oil for either transport, heating or electricity then all hell would break loose. Severe rationing would need to be enforced and shortages would begin to accrue. Life for the average worker would be on a hiding to nothing. A severe depression would set in that would make the 1930’s look like a holiday camp. Law and order would be the first casualty and many governments would fall leaving behind chaos and anarchy.

One way to avoid this scenario is to dampen demand ahead of time. Jump onto the climate change bandwagon and pressure your politicians on the urgent need to take climate change seriously. Substantially increase the tax on all carbon products and use this tax to move the economy towards a sustainable ‘green’ future for the long term benefit of future generations.

The Peak Oil Catastrophe-In-Waiting

Audio by experts on oil production concerns