Energy and Geo-Green

Above is the graph of Crude oil prices over the last one month. And most of the other commodity prices are showing similar violently. The issue for at least oil is one of geo-politics influencing an already strained supply chain of crude oil. Nations such as Venezuela, Russia and other such suppliers are constantly in the minds of international investors and traders. With every increasing demand from developing countries, the price of oil will be one to watch for years to come.

(Another commodity which has been in the news lately is gold, which occupies a unique position as both a commodity (as in raw material used in various functions) as well as safe haven currency.)

Coming back to oil, and more accurately energy it represents to the consumers, energy demands are increasing ever more where as the supply is limited to fossil fuels. Fossil fuels mainly are oil, natural gas and mostly forgotten but very important material Coal.

Coal enjoys some of the highest demand in the world since significant amount of electricity in the world is produced by burning coal. It is a very effective raw material for energy as long as transportation charges are not huge.

Coal is one of the “re-discovered” energy sources of United States after Bush came back to power along with nuclear energy. Heavy investments are being encouraged in coal-related industries as an alternative electricity generator.

Why am I talking about coal now? Because I am reading Coal: A Human History. Economic History books have always interested me, however, this book is more than economic history of coal, and the book describes history of the evolution of industrial lifestyle and labor movements. Imagine carrying sand along with you during a train ride, incase somebody next to you would catch fire?

And speaking of energy dependence of humans, did anyone get a chance to read yesterday's article in New York Times/ Gulf news (re-printed) by Thomas Freidman? Freidman is advocating something called Geo-Green. He argues that energy prices are inversely proportional to independence movements and human rights. That is high oil prices led to higher human right violations. Arguably higher income for the government (or dictator) would encourage corruption and inequality among the population. This would lead to public discourse and finally crackdowns on “terrorists/freedom fighters/general public”. Freidman cities Russia as a prime example and USSR broke since oil was only 17$ a barrel during 1984. He wants American leadership to invest heavily on alternative technologies as well as increase the price of oil by having a gasoline tax. This action, he argues, would take US out of energy dependence as well as promote democracy across the world.