July 4, 2008

Is rising oil prices good for man-kind - Seems so !!!!!

This is another contradiction from me against the popular view. I still urge the reader to read through as I decided to post this after lots of deliberation over last 15 to 20 days. It was not easy for me to accept too that how can high fuel price be a good thing but at the end of repeated NOs, I felt YESSSSSSSSSSS, looks like it's good for the human race.
Over last few months I have been reading effects of rising oil prices over world economy. Many economies including developed, developing and under developed have started reported slowing down of the growth. This is not helping to pull out vast populations in the economies from below poverty line to live a better life. There are reports that high food prices are also a result of high oil prices. Reasons given are (1) Transportation cost :- Food is often consumed are far off places than the place of origin. (2) Processing and storage cost :- Many of the produce of the nature has to be processed before it can become edible and at many times needs proper storage solution so that it can be consumed later. All these need energy and with oil/crude prices spiraling these prices are going up. (3) Moving resources toward bio-fuel production :- Because of high oil costs it's economical to produce and convert bio-fuel to be used in vehicles and factories.
All of the above mentioned stuffs are correct. High oil prices are partly responsible for throwing many economies out of gear and high inflation is being experienced. High oil prices contribute to rising food cost as well which affects poor population of the world more than better-off population. How ever lets think of the following effect of high oil prices on the society and population which are equally true and seems to be better from a long term perspective.
(1) High oil prices in free economies[mostly developed countries] are making think of moving away from using more of fuel. There are lots of people who have stopped using personal transport and have switched to public transport. There are lots of people who have switched to bi-cycles from motor bikes and cars. There are report booming sells for bi-cycles in Europe and America. This is leading governments to improve public transport at faster pace as it's becoming more and more important for the economy. People moving to bi-cycles is leading people to exercise their body making the population fit, reducing health care costs :) Think of it friends !!!
(2) Many closed or semi-open economies are being forced to withdraw oil subsidies and move toward open and free system. They don't find it any more affordable for the national exchequer to continue to subsidize the oil and food prices. This is doing a lot of good to them though they have been forced on this path because of high fuel prices. I think most of you will agree that open and free economy is the way to move forward in comparison to a economy where good and prices are not tuned to the demand/supply rule. This will lead to a better life for people in the economy.
(3) Certainly less/efficient oil consumption is good for the environment and earth. We owe it out future generation and other co-habitants on mother earth. It's not really lesser consumption but as oil production is not going down but instead it's going up. It's more of efficient consumption - this means it's ensured that burning the fuel is not causing to have detrimental effects on environment. If this is continued for 1-2 years it's will become a habit of society, industry and regulators. There after even if the oil prices come down good habit developed will not get wiped out. I have been reading few reports where by it's being predicted that oil price rise is temporary and with in 2-3 years time it will have to come down to about USD100 level. Many reasons have
been given for this to happen. Anyways for me what I see high fuel prices doing is reduction is detrimental effect on the environment and nature.
(4) Necessity is mother of invention :) You must have read of reports of governments increasing research budget for alternative budgets and green environment. Again it's because of high oil prices. They want cheaper energy sources and are therefore scouting of other ways of harnessing energy. So we can look forward to new invention is days ahead to take the human race forwards in the journey of time and space.
These things are definitely better for long term then the temporary blip we are facing because of high inflation and food prices. Food prices have in fact started coming down specially for rice though we can look forward to going back what it used to be 6 months back but it looks like will adjust some where in between. Man and animals can adjust to these fluctuations but we can not be assured of the same adjustment to be done by nature and trees in favor of humans. And the adjustments/changes nature will make may be something to which we/humans can not adjust
:) So I feel that high oil prices is good for us for about a year or two.
Comments are welcome !!!