Oil: A Bumpy Ride Ahead

World Policy Journal

By Ian Bremmer

(Excerpt) Over the next 25 years, the geopolitics ofoil will likely prove a bad news/good news story. The nearer-term bad news is that,while politically inspired upward pressure on oil prices will continue for the next several years, price fluctuations will be cyclical, undermining the sense of crisis needed for a focused global push toward the large-scale development of alternative sources of energy.

 

The good news is that, over the next 10 to 15 years, hydrocarbon alternatives— and the infrastructure needed to deliver them—will begin to come on line. A generation from now, global energy markets, less reliant on oil exports from dangerous places, will become much less vulnerable to the sort of system-wide political risks that can generate international upheaval.

 

For the next several years, political factors will continue to pressure energy prices from both the demand and supply sides. The sources of rising demand have become well known. Surging economic growth in emerging-market heavyweights like China and India has sharply increased their energy consumption, as industry in these countries expand their productive capacities—and as hundreds of millions of people move from poverty toward middle-class lifestyles.

 

The recent history of the automobile in China tells the story. In 1984, the first private vehicle was sold in that country. By 2006, 1,000 new cars hit the streets of Beijing every 24 hours. By the end of 2007, there were 15.2 million privately owned automobiles on the road across China. There’s plenty of room for this number to grow, because fewer than 4 percent of Chinese citizens already own a car. In fact, some forecasts suggest that there could be more than 300 million vehicles on China’s roads by 2033. Similar dramatic changes are underway in other developing countries. Sustaining and extending these economic gains will prove crucial for the long-term social and political stability of a growing number of emerging market states, and the governments of these countries know it. That’s why we can expect these trends to continue.

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Ian Bremmer, a senior fellow of the World Policy Institute, is the president of Eurasia Group, a political risk consultancy, and the author of The J Curve: A New Way to Understand Why Nations Rise and Fall (Simon & Schuster, 2006).