The Future of Energy and its Implications for Businesses and Societies

The Oil based Paradigm and its Impact on Businesses and Societies

The whole edifice of society is built on energy. We need energy to power our vehicles, electrify our homes and offices, and to give us products that are manufactured by byproducts of oil and gas. It is common to talk of oil and gas as the primary products whenever the topic of energy comes up. This is because the industrial revolutions as well as the stupendous advances made during the 20th century were all powered by oil and to a lesser extent by natural gas.

It is safe to say that oil is the lubricant that greases the wheels of modern civilization and there is no way we can live without it and not cause dislocations and collapse of modern civilization. However, oil is a finite resource and though we might not ever run out of oil, it becomes progressively difficult to extract it and the era of cheap oil is over. This phenomenon is known in technical jargon as “peak oil” or the point beyond which it becomes costlier to extract oil. Many experts believe that we have passed the peak and some have also attributed the present economic crisis to the depletion of oil and it becoming costlier to explain why the disposable incomes of Americans have taken a hit.

Envisioning a Post Petroleum World

This means that we need to start thinking beyond oil if businesses and societies have to transition from oil energy based paradigm to an alternative energy based paradigm. Though this talk of energy transition has been going on for some time now, no concrete action on a large scale has been taken to wean the world away from oil and to transition to an alternative energy based paradigm. Indeed, the situation is dire and urgent, as any alternative energy source needs to build infrastructure like storage depots, transport mechanisms, and conversion methods to be commercially viable. This infrastructure cannot be built overnight, it would take years before that are in place, and hence, the time is now to transition into a post oil based world. We often hear business leaders and policymakers talk about sustainable development and one of the first points in their speeches is about how we need to find alternative energy sources to carry forward the industrial civilization that we have built for ourselves. Apart from this, the other aspect about moving beyond oil is that it has been the primary reason for conflicts in the oil producing countries of the Arab world and Africa as well as in Russia and hence, for a peaceful and stable world, it is high time we moved beyond oil.

Some Alternatives to Oil

In recent months, much has been said about shale gas as an alternative to oil and indeed, the hype around it is growing as it is touted to free the United States from dependence on the Middle East and make the country a net exporter of energy as opposed to the present situation where it is a net importer of energy. Apart from this, countries like India are also supposed to have deposits of shale gas, which means that their importance to the global economy would increase. However, as mentioned earlier, it is not enough to find an alternative source of energy. What is important is to have the infrastructure in place to make it commercially viable. This is the reason why wind power, solar power, and fuel cells or the hydrogen alternative have not taken off in a major way as the commercial viability of these sources of energy has not been proved demonstrably.

Concluding Thoughts

Finally, it is understood that oil is going to be around with us in the near future. After all, the Stone Age did not end because we ran out of rocks. Therefore, the oil age would not end because we ran out of oil but because the environmental, social, efficiency, economic, and political costs of the oil age have reached a point where we must address them or risk the collapse of modern civilization.


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Managerial Economics