Sunday, June 29, 2008

The New Oil Order

The end of the world as we've known it is rapidly underway
When oil reaches $150, Americans will be spending around 12% of their incomes on energy. Some believe this value represents a tipping point. It may be. But whether it is $150 or not, we can begin right now to anticipipate the changes that are about to happen.

Globalisation in Reverse

The world prides itself on its efficiencies. We're able to produce vast amounts of food, effortlessly move goods and people around the world. It's been a world of choice up to now, with barriers flattened to allow the exchange of trade and world commerce. People and produce have been able to move virtually effortlessly all over the world.

All these selfsame efficiencies also work just as efficiently in reverse - that is to say, unravel quickly. An example of an 'efficient mechanism' in our lives, particularly in suburbia, is electricity. While electricity can allow us to to quickly cook meals and dry hair and warm our baths, when it is no longer there, the breakdown is very rapid.

The same is true for the efficiency we get from driving to the mall to stock up on everything we need. When we can no longer do that, suburbia becomes dysfunctional, and a Dysfunctional Suburbia is implicit in The New Oil Order. And for air travel and so on.

The World Is Unflattening

Not long ago star New York Times writer Thomas L. Friedman wrote 'The World Is Flat'. Friedman's book now represents a manual for what is going to disappear the quickest. If you read the book critically, you will understand that the unstated premise for virtually all the flattening forces is cheap energy.

Now many of the companies that Friedman cites as successes are likely to crash and burn. Some of the world's wealthiest companies will disappear off the Fortune 500 in months, if not weeks, never to be seen again. McDonalds and Coca Cola are just two examples.

And as this process gathers momentum, the world effectively becomes a much larger place, and it becomes difficult to operate with the ease and convenience we've been used to...

Say Goodbye

The first casualty of high oil prices are vast swathes of the poor, especially the rural poor. They may disappear for a while from the aisles of commerce (informal industry mostly) but they will reappear in cities as massive disordered and desperate militias.

Meanwhile, industry can begin by bidding the airline industry a fond farewell. The biggest may survive longer, and Singapore Airlines with its supersized A380 might be the last to go. Airlines in the Middle East like Qatar Airways may also stay in business for an extra season or two. The future of air travel will belong to an elite few, and airlines as we know them simply will no longer operate. To date over a dozen international airlines have declared bankruptcy in the first 6 months of 2008 alone, including:

Air Blue (Pakistan)
City Star Airways (UK)
Frontier ASirlines (US)
Nationwide Airlines (SA)
Palestinian Airlines (Palestine)
Tavrey Airlines (Ukraine)
Jet4You (France)
Euromanx (Isle of Man)
Aeropostal (Venezuela)
Silverjet (UK) amongst others*.

The vast silos that are today's airport buildings may in 5 years be converted into art of technology museums.

Say goodbye also to the services that rely on airlines, such as courier companies. This means FedEx, UPS and affiliates like

Giant scale operations - from air travel, to farming, to industry (think General Motors)will scale down drastically.

This represents an implosion in world tourism, which means world spectacles like the Fifa World Cup and the 2012 Olympics are going to be beyond the reach for 90% of consumers. This also has an impact on all those services that survive on international tourism - entire hotel chains, car hire companies, restaurants and the like.

Supermarkets like Wal-Mart, Carrefour (from France), Pick 'n Pay (in South Africa), Tesco's (in the UK) and countless others will first face stock shortages for fairly unconventional goods, and then more and more basic goods, including fruit abnd vegetables. These markets knocked out local markets once upon a time, ruining many local grocers and farming industries. These local operations are about to be reborn, and as they re-develop, these smaller local markets will subsume the supermarkets.

The End of Offshoring and Supply Chaining

Multinational corporations will quickly lose both their ability to make use of foreign labor sources, and to do so cheaply. Once again, trade is about to become more local. This means that if your country does not build computers for example, these devices are about to be priced virtually out of the market.

Electronics are going to go the way of airlines. Generics may survive, and some of the cheapest and most useful will survive better than more complex and far-to-source models. In countries where internet costs are not minimal, internet usage will drop drastically.

Media will shrink, from the number of TV channels, to the number of newspapers serving an area, to the number of magazines on the racks. Blogs however will continue their resurgence, but become more functional and community oriented. In some countries - depending on how long internet infrastructure is in place - newspapers will disappear entirely in favour of internet based data. In other countries, particularly where the internet is still a young industry, newspapers will reclaim all lost ground and the internet may disappear altogether.

More and more people will be renting, will be without cars and even mobile phones. The number of the urban poor will swell to alarming levels. All of this represents the end of endless choice.

The Beginning of Repair Shops

We will no longer be able to afford our throwaway culture. If something breaks, we will have to find people - technicians - to fix it. Warrantees and guarantees will become meaningless.

People will have to learn skills again - not only how to fix things, but also how to make things. When toilet seats no longer arrive in containers at coastal cities, or fishing rods, or piles of clothing, local industries will have to fill this vacuum. It will take time, and it will not be easy. Old people (with skills) will become the new celebrities.

The End of Capitalism

We will see a stock market crash based around the realisation (in markets) that not only is economic growth no longer logical, but depleting energy means breakdowns in all the financial architecture that was designed on top of it. From property markets, to banks, to entire industries including (of course) the auto and food industries. Obviously when entire banks fail, so will capitalism and what remains of the financial apparatus.

Money will have little or no value in the future, and commerce will be done via barter, and probably in a disorderly manner. Agriculture will become a big industry, along with other forms of resource management (mining, forestry etc).


It goes without saying really that all these transitions are likely to be associated with unpleasant levels of public disorder. It's likely that around the world authorities will struggle to maintain law and order. Governments will have a hard time staying relevant and of use to suddenly impoverished mobs. These struggles will place additional strain on those Cheap Oil Relics that survive, for example municipal services, and roads. Who will maintain these in a world that can no longer afford very much?

One of the new projects (mentioned above)will be farming, but not so much with machines and the accoutrements of first world technology. Probably we will have to pay a lot of attention to the soil in order to produce anything of value and in significance. quantities. In the new world we will be particularly vulnerable to diseases and pandemics, and also to climate change. With so much to face, individuals will struggle. Communities with talented and skilled craftsmen who work together will do better to adapt. Sharing a common purpose or faith during this period will also benefit these groups over those that have become dispirited and lost their way.

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