Plowing paddy fields with ox-power at Labangalatika's farm (Govardhan Trust) in Raigad, India
By Chand Prasad PH.D. Agricultural Economist
Written for ISCOWP News VOL 15 Issue 2
Oil is the lifeblood of industrial economies and modern agriculture throughout the world. But oil is also a finite, nonrenewable resource that is being rapidly depleted by Western societies and less developed countries that aspire for higher consumption levels. The United States alone uses approximately 20 million barrels per day – about one-fourth of global consumption. Oil production will peak at some point and then decline, leading to sharp price increases and painful adjustment costs, particularly for those who are strongly attached to the amenities provided by petroleum-based production and transport systems. One bright spot is that these difficulties may encourage an increasing number of people to question the values and assumptions upon which society attempts to sustain opulence and prosperity through dependence on finite resources.
Rising energy prices will impose economic hardships well before the earth runs out of economically accessible supplies of oil, and perhaps even before oil production attains its maximum daily (peak) amount, after which it then declines. The International Energy Agency (1998) estimated that conventional oil production could peak between years 2010 and 2020, while Campbell & Laherrere (1998) put the year before 2010. It is important to note that even before we reach this maximum, the costs of extracting petroleum could rise sharply, as oil companies are compelled to tap into oil deposits that are less accessible. The result is higher energy prices charged to consumers and businesses, which is equivalent to a massive tax that drastically reduces economic growth, particularly in countries that depend heavily on imported energy. Moreover, it takes a certain amount of energy to produce oil. Higher energy costs will therefore increase the costs of extracting oil and natural gas, implying a self-reinforcing, albeit decaying, feedback effect in which rising petroleum costs calls forth still higher energy prices. Finally, the costs of extracting oil will exceed the benefits, implying that further production is not economical.
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