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America is already experiencing energy problems, but they are nothing compared to the energy crisis that will descend upon this nation in the not too distant future. The question is not if this crisis will actually occur, because it is inevitable; the only question is when. Such a crisis has long been predicted, but now is drawing ever closer to becoming a reality. And when it hits, America will find itself totally unprepared to withstand its fury.
No, the world is not going to run out of oil; that won't happen for a long time. But what will definitely happen is that, in the not too distant future, say within 5 to 10 years, the world's demand for oil will overwhelm the production capabilities of the oil producing nations. That point in time is generally referred to in scientific terms as "Peak Oil." That's when the world will enter an era of rapidly declining supply and skyrocketing prices -- the end of cheap oil.
Let's put it this way; oil is to the world as blood is to the human body; without oil the world as we know it would become the modern day version of the Dark Ages. Oil fuels the commerce of the entire world; it contributes to and affects almost every element of our lives. Think of almost any product, from gasoline to fertilizer and the majority of various personal and household products you buy. It's safe to say that some part or all of them was derived from oil or a byproduct.
While this energy crisis will impact the entire world, America will be hit the hardest. While statistics vary, in a typical year world demand for oil has reached as high as 85-million barrels per day. The U.S., with its insatiable appetite and addiction to foreign oil, uses about 25% of the world supply. How about that for overindulgence?
For all those naysayers who completely disregard the evidence supporting the coming end of cheap oil, consider these facts. First, the world's oil reserves, especially in nations such as Saudi Arabia, Mexico and others, are steadily declining while new oil fields are not being discovered. Second, as an oil field ages, it becomes far more expensive to extract oil from deep in the ground.
How did we ever get to this point? Well, this coming crisis could have been largely avoided or, at least, greatly diminished in its impact if America had heeded the many warnings over the past several decades, starting when the members of OAPEC, the Organization of Arab Petroleum Exporting Countries, proclaimed an oil embargo in 1973 as a response to the U.S. decision to supply arms to the Israeli military during the Yom Kippur War.
This oil crisis lasted until March 1974 and it severely impacted the entire world. You might recall the huge lines at the gas pumps and how greatly it affected our daily lives. That embargo and oil crisis was a distinct wake-up call for the world, and especially America, to realize that it must immediately take steps to drastically reduce its dependence on imported oil.
Yes, we had a great opportunity to address this energy problem and begin the process of developing alternate sources for fossil fuels. And what did we do? We did absolutely nothing. We immediately fell back into our bad habits, continued our intense love affair with autos and long commutes; it was business as usual. The U.S. government, unable to withstand the intense pressure of oil industry, caved in and failed to seize this perfect opportunity to change direction.
So, as this crisis approaches, and we in America continue to totally ignore it, how is this entire scenario going to play out?
Of course, there is no way of knowing for certain but let's think about it as a two-phased scenario; an initial phase which will be very difficult and painful with which to deal, and then a second phase in which we could experience the beginning of a new era for America.
Phase I -- Dramatic Changes
This crisis will be like a double-edged sword; at the very same time that the oil supply begins to substantially decline, the growing economies in China, India and other developing nations will generate an even greater demand for oil. These two developments are totally incompatible, which will cause a massive collision between supply and demand.
We will then most probably see a huge jump in the cost-per-barrel of oil as the nations of the world enter into vicious competition in an attempt to control as much oil as possible. Another detrimental factor will emerge as many of the oil producing nations, in order to guarantee their own future supplies, will cut back on their oil exports to other countries. Supply will further decline and prices will rise to new heights.
As this process further evolves, total shipments of oil will be greatly reduced. Also, ocean transport of a wide array of raw materials and products via tanker and cargo ships will also decline. That will adversely affect, and significantly reduce, exports and imports between trading nations.
Phase I could take two different directions. If it happens as a natural evolutionary process it will cause disruptions, inconveniences, and significant lifestyle changes, but not a catastrophe. There will be lines at the gas pumps, maybe even gas coupons to more fairly allocate supply; less travel by auto and planes, fewer long commutes, more relocation closer to cities, a huge reliance on mass transit and high-speed rail. It will be a difficult and painful experience but a manageable one. In the long run, it might be the best thing that can happen to America; and, it just might be the only way to save America.
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