Flickering Oil/Gas Prices Diminishing Economic Sustainability

Posted on March 14, 2011 in GlobeScope


By Jodhbir Singh:

The uprising in Libya has resulted in more than 600 comments on NPR: America’s public radio’s Facebook post. In its post, NPR asked small business owners in the US about their experiences with rising gas prices in the country. Some said that it hurts their businesses and any increase in prices of their product or service is going to have negative impact on their businesses. This increase in gas pricing is directly linked with the rising oil prices in the world market due to reduced production in Libya.

We have seen similar hue and cry in India regarding the rising prices of petrol and diesel. In such a typical situation, it is opposition leaders who lead protests against the government decision. However, by increasing prices, government has to bite the bullet to keep the economy in good health.

The comments on Facebook and protests in Indian streets show us the size of our unsustainable economies that they are heavily dependent on non-renewal resources. The US consumes 25% of the world’s energy even through its population is less than 5% of the world’s population, according to the US census bureau. It puts a challenge for other world economies to compete for the remaining resources in the world. With India and China leading the race in development, huge amount of resources are being directed to the two countries.

The downside of this depends on how foreign countries may put the political objectives of a country at risk. After the death of hundreds of protestors in Libya, the west, including the US, put sanctions on Gadaffi and his close associates. Gaddaffi who is well known in politics tried to lure China and India with its oil reserves, if they favor Gadaffi in this turmoil.

Few years ago when oil prices were being projected at $200 a barrel, the governments, financial institutions, shipping industry, aviation industry, and numerous other industries which are depended on oil for their existences, were agape in astonishment. Internet forum, blogs, newspaper editorials and talk shows were full of experts who were asking for a paradigm shift in our energy policies.

Soon after, the recession in the US brought down the oil prices. The reduction in the US’s production reduced its oil consumption. However, as the US is coming out of recession or increasing its productivity coupled with rising nations — India, China, and Brazil, we are again hearing the similar sounds for the creating of a new world, but it will be interesting to see if we get back to normal once Libya calms down.