In his book The Third Industrial Revolution, Jeremy Rifkin ties the rise and fall of crude oil prices to the flagging of the global economy. We want to spread the word, so we're bringing it to you Epipheo-style!
What do you think? Is Rifkin on target, or way off base?
You know, it seems like every time the economy starts to get stronger, oil prices go up. Way up. And then the economy struggles again. So what's the deal with freaking oil?
Well you see, oil used to be a cheap and abundant resource. So much so that crude oil created a byproduct called gasoline, which at one point was just considered waste. So we designed engines to run off that gas. And this was the beginning of what we call the Second Industrial Revolution, and it's a time of great economic growth.
It made it so that most of our transportation and distribution of goods is dependent on oil. 35% of United States energy comes from oil. We also grow our food and petrochemicals made from oil. Construction materials are made from oil. In fact, Americans consume petroleum products at a rate of 3.5 gallons of oil per day. And that's not just in fuel. Here's a list of other things that we use that are made from oil.
Now here's the problem: While there used to be plenty of oil that was easy to get, today we've used a lot of it. But don't let those tree-hugging, Earth-is-your-mother kind of people freak out on you, because there's still a ton of oil left in the ground. In fact, arguably we haven't even hit peak oil yet. Meaning that there's still more oil left in the earth than what we've taken out.
But here's the thing: Human population is growing rapidly, and certain countries like China and India, who are largely responsible for putting so many new people on this planet, are becoming industrialized and using more and more oil. So while there's lots of oil left to be sucked out of the earth, there's more and more people consuming that oil.
So in the early 1900s when we first discovered oil, the amount of oil available per person was growing steadily until 1979. You see BP discovered in a study that it was that year that the amount of oil available per person on the planet peaked. And ever since then has been going down just as fast as it went up. In fact, for the past few decades we consume 3.5 barrels of oil for every new barrel we find. So because of population growth, oil is going to become less abundant and harder to get to...unless we could find a backup planet.
So here's the real problem: When the economy is humming, we're producing more, buying more, transporting more. So in turn, we use more oil, which makes the price go up, and since our economy is based off of oil, the price of everything goes up. Which means the amount of things we can afford to buy goes down, and that makes the economy slow down again.
In fact, every time we try to work ourselves out of a recession, we bring the price of oil back up with us, because it's the lifeblood of our economy. So remember in July of 2010 when oil hit $150 per barrel? Well that seems to be about as high as our economy can handle before everything collapses.
If we really want to see our economy prosper again like before, we can't rely anymore on the Second Industrial Revolution. What we need is to build a new economy that's not dependent on oil. What we need is a New Industrial Revolution.