and How Buying Oil Companies Can Help You Hedge Against the Risks
Any way you look at it, the depletion of oil stocks has permanent negative effects on society as a whole worldwide. The United States is the number one consumer of oil in the world, with China following closely behind, and already we are starting to see the lasting effects of dependence upon oil production and oil stocks. Prices of oil products like heating oil are shooting through the roof, especially gas. However, the United States is not the only country at fault for the rising value and falling supply of oil. Global growth has led to a peak usage of oil throughout the world. Unless something is done soon to replace oil as a major source of energy, this resource will be depleted, and pocketbooks will begin to feel the pain as the situation worsens.
What has led to such a catastrophe in this day and age?
Why has technology not found a better way to fuel cars, heat buildings and produce needed energy?
The truth is, there are other ways to meet these needs; however to do so economically on a large scale is a huge problem.
In recent years, the price of fuel in the United States has doubled due to limited access to oil stocks and production. Imagine the cost of a gallon of gas should these sources get perilously close to completion with no alternatives, or simply their shipping compromised. With oil demands and usage peaking around the world, the danger is imminent. Consumption is at an all time high, thanks to the Industrial Revolution, which brought about the development of cars, factories, and other machines that consume oil at unbelievable rates. Power plants use oil and gas to generate electricity, while there are other alternative heating solutions that could help rid the world’s dependence upon the single fossil fuel.
The Impact of Growth
The major cause of increased oil stocks depletion is simply growth. There has been global growth in population as well as technology, and both have fueled (pardon the pun) the need for fuel. Population growth has been rapid especially in areas where there is a concentrated source of energy available, though this has caused even further complications. By gathering in one area with great density, a population will place a high demand on the energy resources and therefore cause energy shortages when the supply cannot meet the demand. This means that more oil will be used to fuel the large population, further depleting oil stocks and possibly denying a more needy area of the same energy.
When the world oil reserves are tapped, and the demand is much greater than producers can manage, the consequences will be drastic. There will be higher oil prices, which are already being seen and having an effect on economies worldwide. The price of a barrel of oil has surpassed all time highs, hitting peaks of near $93 recently (October 2007). Not so long ago, oil was around $15 a barrel, so between political struggles, rising demands, and reduced supplies, the price has already been affected incredibly. While it seems a simple process to explore for more resources of oil, it is not; most known large oil stocks have been discovered decades ago, and exploration is a slow process – once an oil stock has been found, it takes up to ten years to start producing on a commercial basis.
Major Power Outages
Another problem that comes side by side with reduced availability of oil is major power outages. If power plants don’t have the resources to produce adequate energy to consumers, especially in densely populated areas like New York City, Los Angeles, and Houston, black outs will become the norm in these areas. Already California has implemented some of the strictest energy savings codes and regulations in the country, and New York is not far behind. They are already experiencing an energy crisis, which will just expand exponentially when oil stocks begin to run dry while lighting and heating needs remain flat or increase.
The Third World Dilemma
Also consider other parts of the world. Many Third World countries, where there is already a starving population due to food shortages, will be lacking supplies for medication, food development, and more due to the inability to fuel the vehicles that bring such supplies. Even the few technological advantages that have been brought to these suffering areas will be of no use to them because they will not be able to afford the fuel needed to drive the industrial equipment, meaning greater food shortages.
Reversing The Trend
Alternative fuel sources must be found to compensate for the need for energy that oil stocks simply can’t provide. In Brazil, this trend has already become hugely successful, with ethanol (or gasohol – a mixture of gasoline and ethanol) having almost completely replaced pure gasoline as a fuel source for vehicles. Most cars in the country have been converted to accept any of these fuel sources and run efficiently and cleanly. In fact, Brazil has become such a large producer of ethanol (which can be produced from corn crop but is typically taken from sugarcane in Brazil) that it has not only provided them with a more economical means of fueling transportation but has also brought great gain to their economy.
While the United States has passed laws to include ethanol in gasoline and stands as the largest consumer of the Brazilian export, the country is still overly dependent upon oil for fuel. The main consumption of oil in America is for energy production at power plants. There are several options that have been brought to the table for conversion of current power plants and construction of new ones using alternative sources for energy production.
Coal as an alternative is actually an inexpensive solution. Currently, there is an enormous supply of this fossil fuel, which is inexpensive to mine as well as to burn for fuel. On the down side, the current procedures for burning coal are not very clean and actually produce large quantities of air pollution. While there are alternative ways to burn the product more cleanly, they are still considered experimental and inefficient. Also, coal is still a fossil fuel and, regardless of the large supply currently available, it will eventually be in the same situation as oil stocks.
Another alternate source of energy in a power plant is nuclear energy. While there have always been questions about the safety of the practice, and the disaster at Chernobyl raised even more questions that caused such procedures to come under scrutiny and be practically eliminated from implementation, nuclear energy is the cleanest, most efficient resource available for energy production today.
Nuclear power plants create no air pollution whatsoever, run efficiently, and never run out of the source of the fuel. There is always matter for fission or fusion, so there will never be a time when nuclear power will not be available. Increased production to meet peak demands is easier in this situation as well. Most of all, an increase in nuclear power plants means the ability to close down some of the old plants that are so quickly depleting oil stocks.
While nuclear energy seems like the ideal solution, adversaries of the idea point out several issues that should be considered. First of all, there is a bit of a risk involved any time nuclear energy is involved. While modern technology and safety procedures can reduce the risks significantly, nuclear power is a volatile resource that cannot ever be guaranteed 100% safe. Also, because there is so much involved in the risk management, including disposal of nuclear waste, the cost of maintenance and safety of a nuclear power plant is much higher than that of any other type of power plant, including oil plants. Also, reserves of uranium, which is often a key factor in nuclear power, is in limited supply, and the entire world is on a hunt for the element.
The wind can also be used to produce energy. Probably the cleanest form of energy producing method, it can be implemented only in regions with enough potential, meaning that the wind has to be blowing almost all the time at an average speed high enough to move enormous props that can generate high voltage current. Ironically, the biggest obstacle to the implementation of wind turbines is the desire of the people to keep their view clean of the windmills…
Therefore, as the world continues to struggle over reduction in oil stocks and discusses the need to reduce oil consumption, all nations continue to tap the fuel source while debating the pros and cons of all the possible solutions, rather than simply coming to terms with the fact that there will always be a negative aspect to any procedure implemented and choosing the least detrimental option.
Someday soon, there will no longer be an option to debate. In the near future, governments in the world will be forced to implement solutions to the fast depletion of oil stocks. This could lead to a combination of procedural implementations – perhaps converting all cars to ethanol-based fuel systems, as well as building nuclear, solar and coal power plants, along with putting up hundreds of thousands of wind turbines. Perhaps the efficiency of wind and water energy, used as an alternative energy source by some electric company providers, will rise and become an excellent renewable resource that is never tapped dry and doesn’t pollute the environment.
When gasoline prices hit $10 a gallon, people might well decide to start drilling in Alaska to search for more oil stocks. While the future is still unclear, it is certain that changes must be made before the crisis becomes a disaster, leading to global chaos.