[TLD Weekend] What happens when nobody buys oil anymore?

It is definitely not hard to recall the time when oil was nearly US$160 per barrel. I remember grumbling every time when I had to fill my tank. Friends even resulted to carpooling.

The oil producing countries (such as OPEC) were definitely ecstatic back then, as state-owned oil companies reported record profits on and on. In recent years however, oil-based economies have started to diversify their interests (mostly not due to foresight) – in particular due to dwindling supplies and lower prices.

Many countries (with exception of Saudi Arabia) had production costs at higher than US$60 per barrel on average making it very unprofitable when oil was trading at around the US$60 per barrel range.

Not surprisingly, as oil prices plummeted so did the economies of many countries. Venezuela’s economy (which is almost mostly dependant on oil) is in a state of anarchy and unrest. The Venezuelan Bolivar is worth nothing, as its population turns to US Dollars and Bitcoin mining to survive.

Lower demand, higher supply

The past 10 years or so saw the growth of China acting as the catalyst to support higher oil prices. However, that growth is starting to wane, and it couldn’t be more evident as Chinese businesses look to overseas market to fuel their growth. While we could argue that next growth frontiers (such as Africa, and possibly North Korea) may help support higher oil prices, many experts don’t see it as having too much effect.

The reason is simple – the US is already fast becoming the biggest oil producing countries. Oil deposits that were not accessible decades ago, now comes within reach with advancement in technology and more importantly, many oil companies (in the US) are given tax breaks to produce oil.

Shifting towards a non-oil economy

The maths do add up. As supply outstrip demand, and as cleaner technology becomes more available and affordable – especially in electricity generation, it slowly (but surely) makes oil redundant. In addition, the alternative energy sector have been seeing an uptick in investments – only making the shift towards a non-oil economy becoming inevitable.

Even with the introduction of more and more electric vehicles (EV), experts gather that it would still take a good many decades before petrol (or diesel) ran engines are phased out. What happens when people stop using oil to generate power or power their vehicles?

A brave new world

For one, environmentalist would rejoice at the thought of a potentially lower temperature on the earth’s surface (although some experts might argue that hydrocarbon burning has nothing to do with climate change). One thing’s for sure – the oil industry would become obsolete, definitely not the monoliths they are today.

We also pose the idea that the following might happen:

1) Increased reliance on public transportation

That’s right, we have categorized future cars under public transportation! One do not need to double guess too much seeing the massive developments in self-driving cars. As these cars make car ownership obsolete (at least for the poor and middle class), it becomes another public transport option. After all, you do consider your Uber or Grab as a public transport, don’t you?

As car ownership goes down, so will the reliance on other means of public transportation (such as the train or bicycle) increase. It is just the natural order of things. Another thing we expect is that flying could cost the same as a taxi ride into another neighbourhood. This is probably true if electricity generation costs are stable (i.e. solar or wind), and not as volatile as oil that could fluctuate according to global demand.

2) Decentralized grid system

The idea of each home having its own electricity generation capability (together with electricity storage) is not something new. Infact, remember this guy?

The national electricity grid may also be rendered useless by the time oil runs out. After all, who needs to invest in such a cumbersome system with tonnes of electricity wasted along the way?

Home owners in the future will be able to generate all the electricity they need, and also sell it to their neighbours using blockchain based applications. If this happens, it will completely democratize the way electricity is generated, and consumed – and reduce wastage at the same time.

3) Supply chain reinvented

Vertical farms in the city will become a norm, as it will be fairly faster to send vegetables to the consumer by drones, instead of sending a truck to the countryside to collect the farmers’ produce. The usual UPS or Fedex mailman will be replaced by drones, and self-driving trucks.

Whole cities, farms and factories will be rearranged to the convenience of a whole new generation of robots, drones and vehicles – all electric powered. Roads might even have the capability to charge electric vehicles on the go.

Conclusion

As we move closer towards a non-oil society – it is wise to think of how our day to day lives might be affected. Whether or not it will benefit humanity moving forward – there’s no question to it that we will indeed have cleaner air to breathe. Beyond that, no one knows. Blockchain could no doubt play a massive role in organising a more efficient way of life.

At Momentum Works, we are not usually futurists – although we have in the past issued a few predictions (ranging from bitcoin to tech in Southeast Asia). While, some of the ideas we have mooted may seem slightly farfetched – we wish to emphasize the purpose of this article is to provoke thoughts of what might be.