Climate Change Versus National Greatness

The world has just received a lesson in what happens when people stop consuming oil. From American drivers driving less to Chinese factories producing less goods, "demand destruction" has been the buzz phrase of the second half of 2008, and for many countries around the globe who rely heavily on the production of oil for their economic health or their very survival, the picture isn't pretty. There, of course, is Saudi Arabia that keeps its unpopular monarchical regime in place by using vast oil wealth to keep the state running, but Saudi is not near any type of inflection point, or brink. There are several other countries that are on various types of brinks. Large oil producing counties like Russia, Venezuela, and Iran (possibly even Iraq) have been brought to the brink of societal collapse, or at least of current regime collapse, by demand destruction. These countries have very little else in the way of economic strength to sustain them in the absence of oil and keep themselves propped up through oil-driven social spending. (There are small fries in this category too, like Ecuador) Other countries, like England, Norway and Mexico are on the brink of severe fiscal distress by virtue of softening oil prices. Massive social spending in these countries is funded by oil revenues. Things won't collapse but governments in these countries will be stressed to afford their generous social spending should trends continue. Lastly, there is another type of brink, but a good brink to be on - the brink of national greatness. Several countries are either new to the oil scene, like Angola, and are making enormous strides, but others are in the process of pursuing game-changing opportunities that will catapult them from also-rans into the upper tier of the oil world. In this category, you have most notably Brazil and Canada. Brazil had found boatloads of oil and is working feverishly to tap into it. The scale of the finds offer Brazil the opportunity to go from being a persistently poor country to achieving living standards among the highest in the world. Massive investments in both physical and social infrastructure like education and healthcare will be possible if Brazil capitalizes on its behemoth offshore discoveries. Canada as well, if it can scale up and drive down costs in its oil sands and arctic plays, will become a true economic power with a vast petroleum wealth spread out over a relatively small population.

Regardless of what brink you're on - collapse or national greatness - all of these countries can count on tipping over onto the wrong side of the brink if there is severe and persistent long term demand destruction of petroleum-based energy. What could achieve that? Recession obviously, but recession is usually temporary. What could do it on a more permanent basis? Pervasive climate change legislation. Each of the countries I have named, and many others that are in the same position on a smaller scale, stand to fall into disarray or be denied dreamed-of living standards at the hands of the next great global climate change initiative. Thus, it will not stand. Individual countries may do what they please to limit hydrocarbon fuels, but only a global initiative stands a chance of doing something meaningful, so the greenies tell us. Just as developing economies won't sacrifice their shot at economic opportunity in order to indulge the developed world, countries reliant on oil production won't vote to kill off global demand for the one industry on which their future rests. The lesson in demand destruction that we've just experienced has shown a large part of the world our potentially green future and I am certain they will have none of it. Angola will not throw off the shackles of Third World poverty with solar panels, Brazil won't achieve First World living standards via biofuels, and Russia won't be able to keep up with the West by virtue of wind. Barack Obama and all the Dems in Congress can dream all they want about resurgent US leadership on global warming. Global climate change consensus is all but unachievable.

UPDATE: The Poznan conference didn't go so well. Fine by me.