German peak oil fears

Yesterday, the draft version of a study by a German military think thank was leaked toDer Spiegel. Subject of the study was the question howpeak oilcould change the global economy. This shows that peak oil is taken seriously by the German government.

Some extracts from the study (summarized and translated by Der Spiegel):

• Oil will determine power: "The relative importance of the oil-producing nations in the international system is growing. These nations are using the advantages resulting from this to expand the scope of their domestic and foreign policies and establish themselves as a new or resurgent regional, or in some cases even global leading powers."
• Increasing importance of oil exporters:For importers of oil more competition for resources will mean an increase in the number of nations competing for favor with oil-producing nations. As this window of time will only be open for a limited period, "this could result in a more aggressive assertion of national interests on the part of the oil-producing nations."
• Politics in place of the market:"The proportion of oil traded on the global, freely accessible oil market will diminish as more oil is traded through bi-national contracts," the study states. In the long run, the study goes on, the global oil market, will only be able to follow the laws of the free market in a restricted way. "Bilateral, conditioned supply agreements and privileged partnerships, such as those seen prior to the oil crises of the 1970s, will once again come to the fore."
• Market failures:As the transportation of goods depends on crude oil, international trade could be subject to colossal tax hikes. "Shortages in the supply of vital goods could arise" as a result, for example in food supplies. Oil is used directly or indirectly in the production of 95 percent of all industrial goods. Price shocks could therefore be seen in almost any industry and throughout all stages of the industrial supply chain. "In the medium term the global economic system and every market-oriented national economy would collapse."
• Relapse into planned economy:Since virtually all economic sectors rely heavily on oil, peak oil could lead to a "partial or complete failure of markets," says the study. "A conceivable alternative would be government rationing and the allocation of important goods or the setting of production schedules and other short-term coercive measures to replace market-based mechanisms in times of crisis."
• Global chain reaction:"A restructuring of oil supplies will not be equally possible in all regions before the onset of peak oil," says the study. "It is likely that a large number of states will not be in a position to make the necessary investments in time," or with "sufficient magnitude." If there were economic crashes in some regions of the world, Germany could be affected. Germany would not escape the crises of other countries, because it's so tightly integrated into the global economy.
• Crisis of political legitimacy: The Bundeswehr study also raises fears for the survival of democracy itself. Parts of the population could perceive the upheaval triggered by peak oil "as a general systemic crisis." This would create "room for ideological and extremist alternatives to existing forms of government." Fragmentation of the affected population is likely and could "in extreme cases lead to open conflict."

Heavy words and a strong message, who have to be taken seriously. The financial and economical crisis have lead to a reduction in oil consumption, which make the fear for peak oil and oil depletion less present. Instead of using this breathing space, we are just wasting valuable time. Investments in energy efficiency and alternative energies are diminishing, again because of the crisis. We should take this opportunity to take a leap forward. As this study shows, the peak oil scenario is not a pleasant one, and is often underestimated.