We are, it now goes without saying, living in an era of huge environmental and economic transitions. Until recently these still seemed comfortably abstract, just over the horizon. But starting with Hurricane Katrina and the crazy 2005 hurricane season, it’s become clear that we have already crossed that horizon and the big changes are underway right now.
The latest of these transition points is high oil prices. Until this year, there was plenty of speculation about peak oil – the notion that worldwide energy demand would outpace the ability to extract petroleum from the ground. But many reputable experts, most notably Cambridge Energy Research Associates, thought we had not reached that point, and might not reach it for a number of decades. (You can quibble about what, exactly, is meant by a “peak” – CERA doesn’t like that imagery, preferring to call it an “undulating plateau.” But the bottom line is essentially the same.)
But now it appears oil prices are high and will keep climbing. CERA is saying we are approaching the break point where high prices force major changes in consumption, innovation, and the development of alternatives:
We are in the sixth year of an extraordinary run-up in oil prices. During the 1970s—a decade that saw two oil shocks—prices rose for eight consecutive years before falling. Break Point envisages prices rising for more than a decade amid increasing industry costs and extreme competition for oil supplies and upstream assets. Only then does the world reach a “break point”—the point at which policy, technology, and alternative fuels everse the oil price rise and oil loses its near monopoly in transportation.
The massive scale of the oil industry and the infrastructure to deliver oil products means that any paradigm shift in liquid fuels supply and consumption will take many years to unfold, not months. Few transitions are smooth—and certainly not one that involves a commodity that is the cornerstone of personal mobility and the enabler of global trade. But the seeds of change are being sown. And, as the swift arrival of Break Point prices has proved, some of the results may come sooner than anticipated.
High gas prices are already reducing driving and swelling mass transit ridership. And these shifts will soon reverberate through the political system. I’m betting, for instance, that the proposed transit line that may pass within a block of my house will soon become a certainty.
This is going to be bumpy and painful, with many unpredictable side-effects. The problem is, our political system is heavily invested both in the oil industry and corn-based ethanol – i.e., dead ends. As long as these subsidies and the ossified political entanglements that maintain them remain in place – and in the U.S. government, they are only two among many – they will be huge obstacles to a successful transition, sucking resources from both sensible conservation measures and promising alternatives.
