Posted by: Jon | 08/03/2011

Predictions Revisited

It may seem premature to revisit predictions made for 2011 only two months into the year, but alarmingly interconnected events are already converging very fast and I have a growing sense that this year will be pivotal in achieving much wider understanding that our future reality will be very different from the comfortable assumptions most of us still hold on to from before the on-going economic meltdown.

It is still too much to hope that we will all collectively have awoken to the realities of our planetary predicament by the year’s end, but the signs are that, to a greater or lesser extent, we will all of us be feeling its impacts wherever we happen to live in the world.

Energy and Economy:

Prediction:  “[The price of oil will] rise to over $100 per barrel and probably (as in 2008) spike much higher, thus precipitating the next dramatic downturn in the ongoing economic crisis”.

Oil is already in triple digit dollars, not as I predicted through long months of continuing high demand from China but from unexpected revolutions now taking place across North Africa and the Middle East. Despite continuing ill-fated attempts to do so, the West’s inability to any longer manipulate the politics of these parts of the world has already caused Brent Crude to hit $120 a barrel and, if disruption spreads beyond oil-producing Libya and Bahrain to Saudi Arabia, analysts anticipate prices will climb to over $200 a barrel. The US, UK and European administrations have been caught on the back foot by these events although security analysts such as Thomas Homer-Dixon (see links at right) have long foreseen the tense demographic conditions of this part of the world as one of the potential flash-points for precipitating renewed global energy and economic crises.

Prediction: “The economic consequences of diminishing energy reserves, in particular cheap conventional oil, will finally receive wider media attention (probably as a result of evidence provided by Wikileaks or another whistle blower)”.

In early February Wikileaks did indeed reveal US diplomatic concern that Saudi Arabia has vastly overstated its oil reserves  – possibly by as much as 40% – which, regardless of present supply disruption, has serious implications for all oil importing economies. But it is actually the revolution in Libya that has caused the media to be suddenly replete with coverage of impeding oil shortages as everybody from Chris Huhne to Vladimir Putin and the International Energy Agency warns of how serious a threat the surging price of oil is to already fragile global economies. The UK Government has finally declared the need to take “urgent steps to wean the UK onto other energy sources” although this reactive announcement is still only a declared intent that in no way compensates for the frightening lack of any coherent governmental energy policy.

Prediction:  Despite insisting that they have capacity to increase [crude oil] production, OPEC countries will fail to do so”.

Saudi Arabia has said that it will boost production to stabilize the price of oil following disruption of supplies from Libya but it remains to be seen whether they will actually be able to do so and, if so, for how long. In any event, Libya’s oil is of a light sweet consistency and Saudi Arabia’s is a heavier crude oil that some European refineries, including those in the UK, are not able to process.  Perhaps, as our own North Sea supplies deplete, this accounts for former Prime Minister Tony Blair’s attempt in 2007 to rehabilitate the Libyan dictator, Muammar al-Gaddafi to the ways of the ‘free’ world.

Economics and Austerity Impacts:

Prediction:  The US, which has not imposed austerity measures, will certainly experience oil shortages, causing its economy to contract.”

The Financial Times reports that hedge funds are now betting huge amounts against the dollar reflecting a growing belief that the currency has lost its haven appeal. The enormous size of the US deficit and the rising price of oil have both been blamed for the dollar’s slide.

Prediction:  “Large swathes of Middle England and their European counterparts will still largely misunderstand the energetic causes of economic crisis” and “will remain complacent about their own circumstances”.

The film “The King’s Speech” has received Academy Awards and nostalgic ovations from British cinema audiences, but in a less well-received speech, another King has affirmed that much of the United Kingdom’s populace still doesn’t fully comprehend the looming impacts of the great financial unraveling now underway.  Mervyn King, Governor of the Bank of England, irritated bankers last week when he said that “The price of this financial crisis is being borne by people who absolutely did not cause it….I’m surprised that the degree of public anger has not been greater than it has.”  He went on to tell the Treasury Select Committee that living standards in the UK may never recover from the crisis.

Ken Clarke, the UK Justice Secretary, accounts for the surprising lack of public outrage because he doesn’t think that “middle England has quite taken on board the scale of the problem”, although he still anticipates serious political difficulties to come as financial cuts take effect from April onwards.

Prediction:  “When oil goes above $85 a barrel, this will lead to further financial turmoil with all its real world consequences and will put an end to the present myth of a recovery in progress”.

It now seems highly likely that upheaval in North Africa and the Middle East will see the price of oil continue high well into the year, thus dispelling any fond lingering notions of a steady return to ‘business as usual’ economic growth. Fatih Birol, chief economist of the IEA, warned last week that oil at anything over $90 a barrel is in the danger zone for the future health of global economies. So with oil now at well over $100 a barrel, lasting consequences will not be confined only to developing parts of the world but will be felt in the affluent West also. And, exactly because we will ourselves now experience first hand the impacts of surging fuel prices, I stand to be proved wrong in my prediction that our absolute dependence for consumption growth upon an abundantly available supply of cheap oil will still be as badly misunderstood by Western populations at the end of this year as it is today.

Prediction: “…the UK’s role in financial services  – and thus its ability to rely upon substantial tax revenues from this sector – will decline”.

The HSBC bank has refuted as premature reports that it is intending to relocate its headquarters from London back to Hong Kong but since such a move could “deliver a 30% premium to the share price overnight “ this may very well be on the cards. 

Prediction: “… the stars of right-wing political parties and authoritarian regimes will continue to rise in the ascendant”.

France is reportedly ‘stunned’ that Marine Le Pen’s National Front party has polled ahead of President Sarkozy and the likely Socialist candidate Martine Aubry in a survey conducted last week by Le Parisien newspaper. President Sarkozy himself has an eye on the right-wing vote as his ban on the niqab comes into force from next month. Meanwhile, as protest erupted in Tunisia, the first response of the French administration was to offer assistance to help prop up the oppressive outgoing regime. And it seems that Saudi Arabia is now mobilising its troops to quell growing signs of  a popular revolt which, as the USA makes secret overtures to the House of Saud to arm the rebels in Libya, is certain to leave diplomats in a quandary.

In the UK, championed by the increasingly anti-Islamic Daily Star, the English Defence League looks forward to becoming a political party whilst the way has been cleared for Rupert Murdoch to extend his right-wing media empire after receiving the UK Government’s go-ahead to complete his takeover of BSkyB without reference to the Monopolies Commission. And in the USA, the likes of Murdoch and the Koch brothers have ensured that the House of Representatives is now dominated by new Republican members who, even if they once believed in climate change, have now disavowed it and have begun to dismantle what limited social and environmental progress President Obama has against the odds managed to achieve.

Environment:

Prediction: “Informed climate change debate will shift from how to reduce global CO2 emissions to how to mitigate inevitable warming impacts. Discussion of the pros and cons of various climate change techno-fixes, especially fantastical large scale geo-engineering projects, will come to the fore.”

The debate is not widespread in the media yet but some climate scientists and academic analysts have begun urgent lobbying for geo-engineering measures to counter the threat that rapid Arctic ice-melt and methane release will precipitate unstoppable climate impacts, including the slowing down of the thermohaline current which could presage more long cold winters for Northern Europe and the USA. It is increasingly being recognized by scientists, environmentalists and climate change campaigners that all attempts to reduce global greenhouse gas emissions have failed abysmally. When the UN climate change convention was agreed back in 1992, greenhouse gas emissions were already rising by an alarming 1 per cent a year. Now, after almost two decades of scientific consensus and long rounds of intergovernmental talks, emissions are still rising – except now by 3 per cent a year! If “megatons of methane start belching out of thawing Arctic permafrost”, any reductions that we might belatedly achieve in carbon dioxide emissions are likely to be irrelevant.

Gwynne Dyer, in his recent geo-political analysis of climate change, “Climate Wars”, reports that there has been “broad consensus that we should not even discuss geo-engineering techniques because of the moral hazard they represent – because we might choose geo-engineering methods instead of emissions reductions – but we only get one shot at solving this problem and we will probably fail without geo-engineering.”

Food:

Prediction:  “…the number of people who go hungry will once again rise above 1 billion as depleting energy reserves, international  ‘land grabs’, increasing global control of food production by profit-oriented corporations, inadequately regulated financial speculation and continuing climate disasters (such as the past year’s floods in Pakistan and heatwave in Russia) combine to keep the price of food very high”.

Earlier this year, the UN’s Food and Agriculture Organization (FAO) said its global food index has now surpassed its previous all-time high of 2008 and is likely to rise higher. The World Bank has reported that the global food spike has pushed millions more into poverty since last summer. Whilst this year’s surge in food prices is not the cause of the revolts in the Middle East and North Africa, the hardship it has caused has certainly been a trigger. In late January, Algeria, Libya and Saudi Arabia were all urgently trying to buy up extra stocks of grain (as also were Indonesia and Bangladesh).

This year’s spike in the cost of food has been caused by last year’s record drought in Russia and compounded by poor harvests in Canada and Argentina. The recent floods in Queensland, extreme weather across the US grain belt and the ongoing drought in China can only exacerbate the severe insecurities of a global food supply already made fragile by the rapidly rising global population (70 million per year), the exhaustion of ‘Green Revolution’ gains in crop yields, the misguided use of agricultural land for biofuels, the increasing demand for energy-heavy Western diets amongst the new Asian middle-classes, and the increasing regularity of unpredictable and erratic global weather events.

Meanwhile, alarm at the commodification of land and the growing trend for ‘land-grabbing’ was a main topic of discussion in early February at the 10th World Social Forum in Dakar. The Guardian reported that “stories from Madagascar, the Democratic Republic of Congo, Mali, India, Brazil and Mozambique illustrate that the phenomenon is widespread” with dire consequences for indigenous farmers and communities who are rapidly “losing their most precious assets to the highest bidder”

Early Conclusions:

It is already abundantly clear that the interconnected and mutually-reinforcing stresses in geopolitics and world economies and in growing food and energy insecurities are building up to a critical mass at an unprecedented rate, the destructive impacts of which can only lessened by an equally unprecedented and concerted global response. As one who has long scoffed at those who point knowingly to the prophesies of the Mayan Calendar, I must confess that I am more than a little disconcerted that my unhappy predictions for the-end-of-the-world-as-we-know-it are now so rapidly coming to pass.


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