Oil and the Casablanca Mentality

French Captain Renault: (loudly) Everybody is to leave here immediately! This cafe is closed until further notice! (An angry murmur starts among the crowd.)

Renault: Clear the room at once!

(Rick comes quickly up to Renault.)

Rick: How can you close me up? On what grounds?

Renault: I am shocked, shocked to find that gambling is going on in here!

(The croupier comes out of the gambling room and up to Renault.)

Croupier: (handing Renault a roll of bills) Your winnings, sir.

Renault: Oh. Thank you very much. (turns to the crowd again) Everybody out at once!

This scene from Casablanca, my favorite movie, reminds me of the attitude of the Bush administration and corporate America toward the looming oil crisis. In early 2005, the stock market took a plunge as gas prices rose. Spiking oil prices seems to have caught the stock market off guard. While acting surprised, corporate conglomerates collected their profits and ignored the obvious repercussions and alternatives.

We're not in a crisis yet, despite the recent surge in local gasoline prices and crude oil soaring above $50 a barrel. These are short-term symptoms of a long-term problem: we are going to run out of oil, possibly by the end of the century. Long before then, production of oil will peak, and then start to decline. This peak may be just a few years away (AP article by Matt Crenson, Associated Press, May 31, 2005). While supplies dwindle, demand for oil is sky-rocketing as worldwide industrialization expands.

Is this news? No, it's obvious. But the powers that be seem to be responding poorly to these inevitabilities.

Rather than encouraging (if not mandating) conservation and adopting aggressive alternative energy research, the current administration prefers two other strategies: 1) drilling in the Alaska nature preserve, and 2) occupying both Afghanistan, a globally strategic country with a major oil pipeline, and Iraq, the third largest oil-producing country behind Saudi Arabia and Iran. Remember that.

The "free" market responds to economic crises by raising prices and increasing production, but this could hasten the breakdown of the worldwide economy while oil runs dry. As Matt Crenson's article says, "When it comes to oil, Mother Nature trumps Adam Smith."

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