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"Oil Crisis Changes Globalization"

by Philip Faigle Thursday, Jun. 19, 2008 at 10:02 AM
mbatko@lycos.com

In the poorest hundred countries, the high oil price is intensifying hunger and poverty. "These people stand at the edge of a possible disaster," Jeremy Rifkin says. The high prices for oil, gasoline and gas change the rules of globalization.

“THE OIL CRISIS CHANGES GLOBALIZATION”

In 2004 the US economist Jeremy Rifkin was certain: the world economy will be in danger when the price of oil rises above a barrel. Today he sees himself confirmed.

By Philip Faigle

[This article published on: ZEIT Online, 6/2/2008 is translated from the German on the World Wide Web, http://www.zeit.de/online/2008/23/interview-rifkin.]




Timid theses are not the concern of Jeremy Rifkin. The economist and author of many bestsellers loves to describe world events with great brush-strokes. In the last ten years he forecast the “end of work” burying “market capitalism” and proclaimed the age of “the network economy.” With these powerful words, the American gained the respect of many economists and rose to be a sought-after advisor of governments. Toward the end of the 1980s, Time Magazine chose him the “most hated man in serious academics.”

His thesis four years ago caused a whirlwind. A rising oil price combined with a continuously weak dollar will plunge the US in a grave crisis, Rifkin predicted at that time and warned of a “perfect storm” that will blow down the economy. The price of oil leaped the mark. Within a year, oil costs have nearly doubled. The price soared to a record mark of over 5 a barrel and the economy in Europe and the US seems almost undamaged. Professor Rifkin, have you been overtaken by reality?

“In no way,” the economist says today four years later in conversation with ZEIT Online. “A new era began with surpassing the mark.” Since then the world economy has veered to a phase of scarce oil weakening the economic engine. Now the economy is losing its dynamic. Airlines hit the wall because of high kerosene prices. Truck drivers in the US demonstrate against the higher price of diesel and gas. Moreover, the high price of oil lowers consumption in the US. While wages stagnate, the costs for heating, electricity and gas climb and leave little money in the pockets of US consumers. In short, the economist sees himself confirmed with his wager.

Rifkin advances a second argument: the food crisis in developing countries. In the poorest hundred cou9ntries, the high oil price is intensifying hunger and poverty. Since the skyrocketing energy prices raise the prices for the production of food, millions more people are threatened by hunger and death today than six months ago. “These people stand at the edge of a possible disaster,” Rifkin says. “What we are witnessing is a dramatic breath-taking social exclusion of a large part of humanity.” This has nothing to do with a “stable” world economy.

But what about the argument that industrial countries use much less oil today for the same output than several decades ago? Doesn’t that help the industrial states to be calm when facing bottlenecks?

That many businesses learned from the two oil shocks of the 1970s is actually “good news,” Rifkin says. Many businesses in western industrial nations need less oil today to produce cars, machines and medicines. However only a relatively small number of firms worldwide take this good news seriously. Others should now begin to act. “This must happen faster,” Rifkin says. “The soaring price for oil, gasoline and gas changes the rules of globalization.”

The economist’s argument is not new. For a long time, western businesses had incentives to shift production to low-wage countries because energy was cheap and transport from one country to another was relatively easy. But the international division of labor is less and less worthwhile since the costs for kerosene and gasoline are now climbing. Threshold countries with their cheap labor markets can entice less capital than in the past.

This also means labor costs become less important and energy costs more important. The chances and power relations could be reconfigured. “Those who lower their energy consumption and minimize their CO2 emissions will win. Those who don’t do this will get caught in the trap of soaring gas- and oil prices,” Rifkin says.

In the opinion of the economist, threshold countries where factories guzzle far more oil than in western industrial nations like China and India will be affected most. These states will not be able “to continue growing if they rely on the old sources of energy: uranium, gas and coal.” The prices for other conventional sources of energy will also rise parallel to the oil price.

“India and China must use their energy more efficiently and inaugurate a third industrial revolution,” Rifkin says. Otherwise a war over the remaining resources and international conflicts will threaten as the world experienced at the outset of industrialization.

Is there a chance the oil price will fall again? Perhaps, Rifkin says, but not to a level to which the market was accustomed for decades. “The price of oil may fall to or but not below any more.” Oil-producing countries are by no means the only ones now forcing up the price. The weak dollar could be compensated by higher prices. “Such an argument ignores the larger scenario,” Rifkin says. “For years we have been consuming three times as much petroleum as we discovered. We are moving to the point where half of the oil is consumed, Peak Oil, “he said.

How long until the “end game” begins, as Rifkin calls it, depends on when the peak of crude oil production is reached. Here there is still no certain knowledge. The economist is only sure a long phase of scarce oil for the world is imminent. “I believe we have not yet understood the significance of this moment.”

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