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To me, the threat of national bankruptcy is nothing compared to the possible widespread economic chaos caused by Peak Oil. Heard of Peak Oil? If you have not heard of this term, please Google for it and learn about it because global peak oil is going to change the whole world, especially in how we live and work and whether there would be enough food for us to eat.
Many of us are totally unaware of the link between oil and food. We only know that as long as we have the money, we can get food. If one were to study the amount of oil that goes into bringing food to our dining table, we can come to the conclusion that we 21st century humans are actually eating oil everyday.
Oil is used in the manufacture of pesticides, fungicides and herbicides. Farm equipment requires diesel. Irrigation requires pumps. Nitrogen-based fertilizers are made from natural gas. Phosphate and potassium fertilisers need to be mined. Food from the farms need to be transported from afar using ships, planes, trucks and trains.
Food processing and packaging factories run on natural gas, diesel, LPG and electricity generated partly using natural gas. Plastic food packaging is mostly made from natural gas. Our food is cooked using liquefied petroleum gas. We need to drive to the supermarket and to restaurants to get our food.
The clear link between food and oil is very well demonstrated in 2008. In 2008, the price of oil shot up to nearly US$150 per barrel. In that year, we have a scary global food crisis. The price of wheat went up fourfold. There were food riots everywhere. There was a global rice shortage.
Philippines was staring at starvation even though they had the money to buy the rice, but not many countries were willing to sell because of local shortage. Luckily they managed to get their supply from Vietnam. We were lucky that Thailand was willing to sell the rice to us.
The global financial crisis of 2008 and the global recession that followed managed to lower the consumption of oil and reduced the price of oil to the current rate of around US$75 per barrel.
Out of the study of Peak Oil, a more scary scenario is proposed. It's called the Export Land Model. Once the global oil production peaks, the amount of oil available year after year gradually goes down. But with the Export Land Model, the amount of oil available for export by oil surplus countries goes down even more drastically because high oil prices pushed up the demand of subsidised fuels in exporting countries, resulting in lower amount of oil available for export.
As we are projected to become a net oil importer in a year or two, drastic actions, such as eliminating subsidies and taxing fuels, are needed to curtail demand and to prevent wastage.
Based on the Export Land Model, even if we are willing to pay high prices for oil from the exporting countries, we may not be able to get it because they may not have much to supply to the world as well because of higher and higher demand in their own countries.
We should have followed what Norway had done with its oil wealth. Norway, the world's third largest oil exporter, doesn't believe in subsidizing fuels. In fact, they have the one of the most expensive petrol in the world, at RM7 per litre.
With their small population of five million people, they could easily afford to subsidise their petrol prices. But their government understood that oil should be treated as capital and not as income and that's why they invested their oil wealth in their government pension fund to benefit all their citizens.
They invest their fund globally, and one of their state-owned telecommunications company, Telenor, owns our local telco operator, DiGi.
