End of era of profligacy
We seem to be at the simultaneous end of many eras. The end of some iconic American investment banks (Lehman Brothers and Merrill Lynch); the end of cheap oil and gas; the end of cheap food; the end of cheap credit; and, with last week’s collapse of XL Travel, one business leader commented that it meant the end of cheap travel. And of course Mervyn King, governor of the Bank of England, noted that Britain had come to the end of the NICE decade — that is, of “non-inflationary consistent expansion”. Presumably he’s working on the words to fit the NASTY decade coming up.
If all these eras are coming to an end, doesn’t that imply that some other ones must be starting? Logically, yes, but the problem with such beginnings is that they’re very hard to spot. When did credit become cheap? When did oil and gas become cheap? When did travel become cheap? When did Britain’s expansion become non-inflationary? There’s no particular date for any of those things. They crept up on us: oil prices didn’t plummet, they just eased down. Same with credit and travel, and all the rest. It was the sudden hitting of the reset button in the past 12 months — with the perfect storm of the credit crunch, terrible harvests around the world and increase in oil demand worldwide — that stopped them all.
You can never recognise the beginning of such an era, only its end. And often the makings of what is to come have been around for a long time; it’s just that the pieces need assembly.
So will this really be an era where food and credit and oil and travel aren’t cheap? The world has faced similar problems before, with the oil shock of the 1970s, which sent inflation spiralling and created huge problems for economies that had relied on cheap energy and food supplies.
That shock drove an era of invention, innovation and dramatic improvements in fuel efficiency in and exploitation of previously overlooked resources. It took some time for the fruits of that work to become clear, but arguably we’ve been milking their benefits for the past couple of decades. Now, we are starting again. Once again we’re going to need innovation and invention and resourcefulness.
Logically, there will be a premium on solutions that are non-capital intensive, don’t rely on oil or gas and can be implemented near where they’re needed. One where we use the resources, but not in a way that consumes them — because any ground-derived resource is, ultimately, finite, and its price will rise as the resource becomes harder to acquire.
It’s going to take time to adjust our lifestyles to a new way of acquiring and using energy. It won’t be comfortable. The US in particular has for years been using oil-derived energy in defiance of its finite nature. But even Arnold Schwarzenegger, the Republican governor of California, has announced a plan to generate 3GW of energy from solar panels, called the California Solar Initiative.
If even The Terminator can see that the time for solar energy has come, then we can also declare another era over: the era of political indifference to energy supply questions, and the start of an era when it’s seen as essential. It happened once before, with the oil shock
of the 1970s. Now it’s time to start afresh. One day, will we call it the era of clean
energy? — The Guardian