Global Trends by Martin Khor

Monday 7 Jan 2008

The year of re-thinking basic premises?

The new year began with the oil price hitting US$100 a barrel, and food prices at high levels. With resources depleting, and global warming’s effects spreading, will 2008 force a re-think of lifestyles and how our societies are run?  


The start of the new year was marked among other things by the price of oil touching the US$100 a barrel level.

At the same time, the price of crude palm oil is also hitting historically high levels.  While there has been an acute shortage of cooking oil in parts of the country.


These events as 2008 phased itself into our lives served to highlight some of the new realities the world will have to face – an increasing scarcity of oil, a looming energy crisis, the depletion of natural resources, higher prices of food and commodities, and a deepening spiral of environmental problems, with a stress on global warming.   

The $100 a barrel oil price may or may not be maintained this year, as some analysts predict a slight decline later in the year.  But there is no doubt that from now on there will be more scarcity of oil especially in relation to demand.

The analysts talk of “peak oil” – the moment when world petroleum production hits its peak and then will decline, in some places steeply, from then on.

Some estimate that we have already reached that moment, while others predict it will come within a few years. Oil gets more and more difficult to extract as the best located have already been taken out. The cost of extraction and the price will thus tend to increase sharply.

In Malaysia, oil has been a major source of exports, government revenue and economic growth for decades.  But its heyday is past. Last week the Deputy Prime Minister Datuk Seri Najib Razak revealed that “If we don’t find new reserves by 2011, our oil imports will exceed exports.”

Indonesia some years ago already reached its “peak oil” point, and today it is a net oil importer.  It will be Malaysia’s turn in just a few years.

The fast rising cost of oil is already causing many ripples. It is contributing to inflation through raising the production costs in many products.

For example, the high oil price is making it more profitable to produce biofuels, and farms in some countries are switching from growing crops for food to crops for biofuel. This contributes to rising prices of some food items.

The demand for biofuels is said to be a major reason why the prices of edible oils has been jumping.  By the end of last year, the prices of palm oil had risen 56% and of soybean oil by 62% compared to the previous year.

The inflation in food prices is causing alarm if not to policy makers then certainly to consumers, especially those that are not well off.  There have been riots in various parts of the world when the prices of bread or flour were raised.

Commodity prices are rising not only due to increased demand, especially from big countries like China and India, but also because of the reduced ability of Nature to supply commodities due to the limited and decreasing stocks of land, forests, minerals, metals and marine life.

Evidence of humanity’s abuse of the environment is mounting.  This is the generation that will suffer the effects, while the next generation will face even more severe consequences.

Last year’s four reports by the Nobel prize-winning Inter-governmental panel on climate change has sealed the debate on whether climate change is taking place.

A “paradigm shift” is now rapidly taking place that will hopefully change the way we look at and treat nature and the environment.

There is simply no way in which humanity can continue “business as usual” in spewing out hundreds of millions of tons of carbon dioxide and other Greenhouse gases into the atmosphere, and hope to sustain a decent standard of living into the future.

Climate scientists believe that global emissions must peak in the next 10 to 15 years and then go down significantly to a level in 2050 which is 50-85 per cent below 1990.

Can this be done, and through which technologies?  How is the burden of change to be distributed, among countries and within countries? 

Will the rich countries, and the rich within each country, try to maintain their luxurious lifestyles and push the burden onto the developing countries and onto the middle class and the poor in each nation?

Should we take the approach (now prevalent, for example in the United Nations climate change negotiations) that we should only change the way in which things are produced, and still maintain current lifestyles?

For example, to assume that every family should own a motorcar (or even two), and what we need to do is to make cars more energy-efficient and use non-carbon fuels.

Or do we need to question and change lifestyles?  For example, that efficient public transport should be developed so as to reduce the need for private cars.

Should we let the economy continue to run on the basis of the insatiable demand of fashion and status driven consumers, whose motivations and criteria of success are cultivated by the advertisements of companies that need to sell more to survive and thrive?

Or to re-think human values and life’s priorities, and reshape the way economies and societies are run?

These are some of the big issues that are prompted by the onset of the peak-oil era, the energy shortage, and the larger crisis of climate change.

The year 2008 is a good time to start discussing the premises of the modern world, if we are serious about tackling these deep-seated multiple crises.