Harvard Business School Working Knowledg e Archive

Summing Up: Preparing For the End of Cheap Oil: How Do We Count the Ways?

9/27/2004

Is the end of cheap oil a challenge to the world? Yes. Will it affect our standard of living adversely? Not likely. At least that is the verdict of most of the large number of respondents to this month's column who rely on assumed human ingenuity combined with market forces and government incentives to bolster their arguments. This view was characterized by Mark Townsend Cox, who commented, "I can count almost twenty methods of creating electricity without burning something, every one of which is essentially an infinite resource that does not pollute or deprive future generations of oil." David Hirsch seconds this notion, saying, "There is nothing our technology (including revisiting our ‘revulsion toward nuclear power') cannot achieve."

There is a great deal of support as well for the notion that we are still the masters of our fate by means of energy consumption. As John Friedery put it, "I believe that markets will regulate consumption ...." Suman Das opines that "The world is a very resilient place." "Relatively minor lifestyle changes can lead to huge reductions in energy usage," in the opinion of David Richie. Specifically, Martin Edic points out that "Much of global air business travel, for example, is unnecessary ... (with) broadband connections combined with free VoIP software."

Necessary behaviors can be fostered by incentives as well as education and the transfer of knowledge, according to our respondents. Joseph Butler suggests that "It is the responsibility of corporations and governments alike to share knowledge and to work to educate developing nations ... about consumption, pollution, and efficiency." Mark Cox adds, "I think that the best method to remediate our world is education about the possibilities. I have rarely found anyone who is not ... fascinated by the possibilities ...."

Governments and global organizations may also provide avenues for large-scale remediation. Several expressed interest in Kyoto-type accords to facilitate incentives for international conservation and pool funds for the development of alternative energies.

Others largely see opportunity in what is happening. Remco de Ket's question reflects this view: "Perhaps running out of oil isn't such a bad thing after all?" Marc Schoenen says, "The spike in oil prices, if nothing else, has fostered a sense of entrepreneurship and opportunity in the renewable energy sectors." And Chip Levy suggests that "This is a great time to leap into a growth industry ...We developed the petroleum industry ...we can develop the clean-fuel market just as well."

A problem may result, however, from differences in the timing of the end of cheap oil and the responses it provokes, whether market driven or not. If these differences lead to a period of very high prices, the pain could be substantial, according to some of you. Jeremy Stieglitz cites one possibility when he says that "An end to cheap oil would very well mean an end to cheap food worldwide. And with 6.5 billion people to feed, I am reminded of a somewhat frightening quote that I'll likely garble: "Throughout history, when humans are left between starvation and raiding, they raid." What do you think?