Outcomes of a Prolonged and Severe Rise in Oil Prices

This post is a thought experiment attempting to outline the possible outcomes of a prolonged and severe rise in oil prices. After making this list, I couldn’t help but notice the similarity to a collapsed economy (e.g. Germany at the end of WWII).

• Food Prices would Increase. Most of modern agriculture is predicated on petroleum, both because of mechanized production, but also because modern agriculture requires ammonia-nitrate fertilizer, which is produced through petro-chemicals. Our capacity to produce enough food for our society would be severely tested, let alone transport it to where it’s needed.
• Economic Crash. Faced with increased prices and prohibitively expensive transportation, the economy could swing wildly. It’s not just about gas prices for commuters; our energy consumption affects virtually every sector of our way of life.
• Surge in use of Public Transportation. With a steep rise in oil prices, driving personal cars would become prohibitive. The United States is particularly vulnerable in this area because it does not have a good public transportation system in place.
• Metamorphosis of Bedroom communities. Cities or neighborhoods without any resources or jobs would either become ghost towns or be forced to develop worthwhile goods and services.
• De-Urbanization. Cities located in areas that did not have natural resources and food supplies nearby would depopulate rapidly. E.g. Phoenix, Arizona has little natural resources locally that could feasibly support a city of 1.5 million people (2007). The population density would be redistributed in ways so that the concentration of people living in an area would be closer to the concentration of people that a given area could support.
• Energy consumption would shift towards Necessities. The more expensive the utility bills, the more unlikely it is that citizens would spend money to run entertainment gadgets like Playstations or race-cars. If one had to choose between heating their home and cooking their food, the food would have to take priority. If water facilities became unreliable, fuel would also have to be spent boiling water. This is the type of situation that exists currently in many third-world countries: the highest single living expense is fuel.
• Surge in use of Alternative Fuels. If it natural gas and coal became prohibitively expensive, it wouldn’t take long for people to start chopping down trees and bushes just to cook their food. Trees within any metropolitan area might be quickly scavenged, and any nearby forest could be attacked. This would reinforce the problem, however; hopefully renewable cooking sources (primarily in the form of solar ovens) would come into large-scale use.
• Increased Corruption. As the economy worsened and resources became more and more scarce, the primitive palm-greasing would naturally become more wide-spread. Black markets and smuggling would grow as we have already seen in countries like Zimbabwe. It would be a matter of survival, and the gate-keepers of permits or resources would likely be unlikely benefactors.
• Devaluation of Currency. If the economy is in a bad state, and there were hungry people around, real goods would have infinitely more value than any paper currency. You can’t eat money.
• Prohibitive Transportation Costs. Alternative methods would have to be developed to perform any long distance shipping. Certain markets would crash or shut down entirely. The greater the distance between the areas of production to the areas of consumption, the more likely that market would be to suffer.

Frontline did a great program about global warming — the problem and the solutions. It’s more than ice caps and polar bears.
“If everybody else were to live like an American, then the planet is doomed.” Frontline: Heat