Michael Rintoul

Blog #2

In the first few chapters of Why Your World Is About To Get A Whole Lot Smaller, author Jeff Rubin explains how world oil supplies affect economic cycles. Rubin continues through the text, describing many reasons why world oil supplies are not able to satisfy world demands. Ninety percent of the world oil supply is consumed by transportation vehicles. The developing countries are increasing their car fleets at a tremendous rate. In fact, within the next couple of years, the majority of cars in the world will be congesting the streets of China and India. In addition, these countries are heavily subsidizing oil consumed by its citizens. Gasoline in Venezuela, Saudi Arabia, and Iran can be purchased for a mere fifty cents per litre. This inexpensive fuel is greatly increasing the oil consumption around the world.

In addition to running out of oil, Saudi Arabia is running out of water. There are no fresh water supplies left to meet its growing demand. However, there is an abundance of salt water and fortunately, salt water can be desalinated to produce clean fresh water. This technology uses a tremendous amount of energy (oil) and it has been estimated, that in the next fifteen years, the Middle East will require 750 billion cubic feet of water per year. It will require one million barrels of oil per day to desalinate that amount of water. To put this in perspective, it is more oil than all of the oil fields in Alaska can produce annually. This lack of fresh water is going to have a huge impact on oil supplies.

Oil consumers have become more efficient with the use of energy. As a result, the price of consuming energy has been reduced. As the cost of energy goes down, the amount consumed goes up. The result of this will encourage economic growth which will also add to the amount of oil being consumed. A similar scenario was in the airline industry in 1975; the price of jet fuel went through the roof. The airlines developed technology to become more efficient and as a result fuel consumption per mile flown has dropped forty percent since 1975. This efficiency reduced the cost of air travel which in turn increased the amount of passenger flights per year – jet fuel consumption increased dramatically.

Oil consumption will continue to rise and rapidly deplete oil reserves because as we improve technology to become more fuel efficient, we increase the amount of oil we can afford to consume.