Suppose the rapture happened. Not the kind followed by the Second Coming of Jesus as promised by Paul, but a rapture of oil.
Imagine that one night, just after the last parents finish tucking in their toddler after falling into a post-ice cream coma, that … poof! All of the world’s oil in untapped reserves vanished from the Earth into a Great Fossil Fuel Heaven.
What remains is just the oil that exists in government or private inventories – extremely limited in quantity.
Initially, this would lead to the speedy recovery of oil prices, which have suffered a decline over the past three years due to a massive supply gut. An output reduction deal by the Organization of Petroleum Exporting Countries (OPEC) and a handful of non-members is no match for a disappearing act of biblical proportions.
In the United States, employers who require the physical presence of their employees to get work done will be the most disadvantaged. Vibrant cities like Houston - laden with six or eight lane highways carrying millions of gas-guzzling trucks – would see empty streets for the first time in their histories.
Oil and gas has had a stronghold on Texas economics since 1901, when the Powell Field was discovered in Corsicana. Cheap fuel coupled with consecutive Republican governments has stymied the growth of public transportation in the state, with liberal hotspot Austin being the main exception.
As a result, Houstonians and the residents of municipalities with similar economic makeups and zoning patterns have become dependent on cars to get groceries and go to work; in short, to live life.
Converting gasoline engines to natural gas engines would be the quickest solution to the transportation conundrum, though the U.S. lacks the infrastructure to make the change for hundreds of millions of vehicles. According to the Department of Energy, only 150,000 American vehicles are equipped with CNG engines.
Pakistan, which has fully embraced natural gas as a default car fuel, completed years of engine conversion drives and educational campaigns before making the big shift. There won’t be time for that in this doomsday scenario, in which 89 percent of Americans with oil-thirsty cars are left with metal carcasses. Related: Why Investors Should Beware Of The Bakken
Cosmopolitan businesses that offer work-life balance options that allow employees to complete their responsibilities online will best be able to navigate the new state of energy affairs in the short and medium terms.
Only one percent of the United States’ electricity is powered through oil, according to the Energy Information Administration’s (EIA) 2015 report on the matter.
Coal and natural gas, each taking a one-third share, dominate the American electricity generation market. Nuclear power and hydropower stand at distant third and fourth positions.
This means that in the short-term, the grid would likely still be active for a majority of Americans, despite the disappearance of oil for cars and other mass transit vehicles. But soon enough, the trains and trucks used to transport coal and natural gas to power plants will run out of petroleum as well, causing a supply issue for the grid’s suppliers.
Apart from transit and electricity, petroleum is used to make plastics, life-saving medications, toys, pens and more.
Growing food locally will likely become commonplace, as the fuel needed to bring fruits and vegetables to markets becomes better utilized to operate other necessary machines. Refrigeration could be a thing of the past as well, ushering in a new area of meats preserved by salting instead of freezing.
It is unlikely that anything in this article will happen as written, though peak oil may someday be a reality. So far, we have only discussed the impacts of an oil-less world to everyday Americans and comparable developed countries. But the biggest geopolitical upheavals will occur in countries across Africa, the Middle East and South America.
The oil price crisis that began with the crash of 2014 is just a taste of what can happen when huge portions of the international economy’s oil wealth dissipate. Revolution and sociopolitical collapse awaited several of the world’s petrostates before OPEC’s November output cut deal. Even now, markets are shaky, and 2.5 years of recession, inflation, salary withholding, and import restrictions are testing the patience of peoples around the world.
In the event that oil disappears altogether, nations such as Algeria, Venezuela and Nigeria, with no plans to diversify away from fossil fuel production as the core of the national economy, will be left rudderless.
OPEC leader Saudi Arabia and its Gulf allies have spent the past few decades investing their oil profits in massive sovereign wealth funds prepped for a “rainy day” in the desert. These states will be able to exploit the savings to keep it together as they spearhead internal economic revolutions without oil.
All of this does not even include the tribulations that will test the officials of China and India – two of the world’s fastest developing economies with the heaviest energy needs. Related: Geopolitical Time Bomb: Chaos In Somaliland Could Trigger Regional Conflict
The development of renewable energy resources has just now gained momentum. The United Nations-led talks in Marrakesh last November brought countries to commit to a timeline for the gradual conversion of fossil fuel-based societies to green energy havens.
Host country Morocco has led the world in these efforts, with the most notable accomplishment to date being the commissioning of the Noor solar power complex in the desert city of Ouarzazate. At maximum capacity, the facility will power one million homes – providing clean power to just a fraction of the 35 million Moroccans living in country.
Still, at least Morocco plans to power 52 percent of its electrical needs through renewables by 2030. With 93 years of untapped natural gas reserves remaining in the U.S., the country will be pushed to switch from one fossil fuel to another via infrastructure investments for liquefied natural gas, should oil disappear.
Internationally, proven natural gas reserves rise by billions of barrels every year. As the technologies needed to extract previously inaccessible fossil fuels develop, economic obstacles for production will drop accordingly.
Even without oil, the likelihood that the planet would face a long-term energy drought is extremely low. A short adjustment period would be required in the improbable scenario that all the Earth’s oil disappears, or if all nations miraculously decide to keep from extracting any more oil from the planet’s crust. It won’t be pretty, but it will be passable.
By Zainab Calcuttawala for Oilprice.com
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