Ahab Shorts the Market

Imagine owning warehouses full of second rate bootleg hooch at the very moment Prohibition is repealed.

Imagine still owning a buggy whip factory.

Imagine possessing billions of gallons of oil, just as renewable energy sources begin chopping major chunks out of your market share. Watching as the worth of your reserves decreases day after day after day.

With every advance by alternative energy industries, the potential price of the world’s oil reserves decreases.

Today, 30% of Germany’s electric power is being produced by alternative sources. How do Germany’s new power producers effect the value of known oil reserves? Replacing oil based energy generators with renewables very simply reduces the value of the known oil reserves. The same supply with less demand equals lower value. It’s a rudimentary equation.

Will a tipping point soon arrive? In the near future, will there be a time when renewables control such a share of energy production that the demand for oil might be so low there is no financial incentive in opposing laws restricting carbon based fuels? Will there soon come a time when the wealth of some nations is not measured by the amount of oil beneath their sands?

Perhaps. It’s one possibility.

What would happen then? Many things. You might be witnessing some of the inevitable results right now.

For decades upon decades the Middle East has been the industrial world’s oil bank. Keeping that particular neighborhood in turmoil has been of extreme benefit to oil consumers. The Oil Crisis of 1973 was just one illustrating instance of how expensive it can get when oil producing nations agree on anything. Middle Eastern instability has been a key element in keeping energy prices low.

But what if the price of oil becomes so low that the instability of the Middle East is of little consequence to the industrial world? What if there is no financial benefit in keeping those nations in turmoil? What if alternative energy sources turn the current flow of oil into a glut on the market?

For many years Israel has been America’s forward base in the Middle East. What if, when oil becomes a too plentiful commodity, the United States no longer cares about events in that portion of the globe? Would Israel remain such a valued ally to its greatest benefactor? What would Israel do if it realized it would soon be of decreasing value to Imperial America? Would it seek to annex certain real estate immediately, instead of waiting until a time when its currency is of decreasing benefit to its benefactor?

Change of any kind involves cost. As renewable energy sources continue their march to eventually replace oil, markets will shift, the earth’s atmosphere may well change, and nations will reevaluate their geopolitical alliances. Some will see the future and act upon it sooner than others.

When employing disruptive technologies such as today’s renewable energy generators, there will always be consequences.

Peter Breschard is the author of Circus Rider and My Love Affair with Barack Obama as well as other lesser works of fact and fiction. Read other articles by Peter.