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Stop stealing from your kids!

Saptarshi Pal's picture

In a recent commercial on oil conservation in India, a kid stuck in traffic jam with his father, notices how none of the vehicles are turning off their engines even though they have been stuck for several minutes. With a very worried look, he turns to his father to remark, “The way all of you are wasting oil, I fear there will be none left when I grow up!

Aren’t we actually stealing from our kids?? We are using up the fossil fuels without any consideration for their future needs. Most parents start saving for their children’s education and future as soon as they are born. They make loads of investments in several avenues to ensure that their children have a bright future. On the other hand, by mindless consumption of our natural resources we are just pushing them towards a future without light!!

According to some reports (different reports put up different figures), we are likely to run out of oil by 2050 and natural gas a few decades later. 2050 or 2070 is not very far away –someone born now will be just 40 years old then! I am 22 years now and I hope to live till that age!! People of my age will start planning for their retirement maybe a decade later, so what are we doing to make this issue a part of our ‘retirement’ plan??

I attended a lecture by an eminent environmental economist, where she argued in favor of an extra tax on oil. This tax is what she terms as “user cost.” To put simply, the current price does not take into account the opportunity cost of not getting to use the oil in future. As it is a scarce resource, there should be some restriction on how much it is to be used. Hence, she advocates the concept of user cost.

The price of oil is not “market-based” but highly distorted due to the presence of a powerful cartel, OPEC, as we all know. On top of that, governments of respective countries (especially developing and underdeveloped) tend to subsidize the oil, to ensure the poor have access to it. Under such a situation, I have serious doubts if a user cost (tax) will be levied. But then again, as the economist pointed out, “if we don’t take these difficult decisions within the next few years, we might be too late!!

The user cost concept is due to the scarcity of the non-renewable resources like fossil fuels. There is an additional concept of “carbon tax” that economists and environmentalists feel should be levied on fossil fuel as they pollute the environment –the opportunity cost of not getting to use clean air in future!! As Maria puts it, we have to think of a fresh and integrated approach to these multiple problems.

Comments

Submitted by Patrick on
This is a bit confused. First, we have been running out of natural resources since people first learnt how to count, or only shortly afterwards. It just so happens that we are never quite 'out', always 'running out'. Second, the pricing part is incoherent. The presence of a powerful cartel does indeed suggest that the price is not a 'free' market price in the most literal sense, although of course it is still a market price. However the cartel would ordinarily be expected to artificially inflate the price - so we are paying extra for oil already. All this without mentioning that whilst some countries subsidize oil, many others (including all the world's biggest users except iirc China) actually tax the hell out of it. So the price is even more inflated. Thirdly but most importantly, this line is terrible: 'As it is a scarce resource, there should be some restriction on how much it is to be used'. Of course, this restriction is called the market price, and as you surely agree, it is already artificially inflated. If oil ever does start to become scarce in reality, as opposed to in environmental economists' dreams, the price will rise. This is sometimes called a 'price signal', the effect of which will be to make alternatives to oil more interesting and to encourage more efficient use. In addition, it will make more complicated and expensive methods of extraction (such as Canadian tar sands and ultra-deep ocean drilling) more viable (this last factor is a big part of why we have never ran out of anything yet, nor even come close). I recommend reading 'Plenty of Gloom', The Economist December 18 1997. It is available online if you or your university subscribes: http://www.economist.com/displaystory.cfm?story_id=E1_QVVRVV

Submitted by Saptarshi Pal on
Hey Patrick, You picked up some very valid points. Due to some restrictions on the blog limit it is not always possible to give out expansive explanations and also a concise one would require using technical terms that we consciously avoid. But, I will certainly give out the reasons for my statements and conclusions. First point: We have been using much more oil today than ever before and our rate of extraction is much above the rate of discovery. Hence, although we never seem to run out of oil yet the probability of such a scenario is much higher than ever before. To give a small example, we consider the Americans to be using maximum oil due to their lifestyle (they certainly have the highest per capita consumption), however, we will soon be having 350 million people each in India and China, who with similar per capita income (a positive factor due to several reasons) aspire to have an American lifestyle (which is a reality) and share similar the hunger for energy. We are looking forward to 9 billion people on this planet by 2050 and these projections are taking into account the basic energy consumption patterns. Second point: You are right to point out that we are already paying more due to the presence of a cartel. I should have clarified that even then some researchers estimate it to be much less than what it should be taking into account the user cost and carbon tax (which alone should result in a three times increase in price, over current level of market price in India to be specific). I have assumed their research, mainly the ones presented in the lecture I attended, to be correct. Third point: The major issue with having a cartel is that they have immense power to fluctuate the world price by controlling the supply. Again, researchers have noticed than the cartel keeps fluctuating the price level. The reason to do so is that if there is a steady increase in prices over time, which should be taking into account the theory of

Submitted by P Venkatesh on
Hi Saptarshi, Greetings! Happy to know about your interest in environmental issues! June 5 is coming. How do you plan to make a difference to the environment and save our planet? Kindly express yourself at http://youthconnect.climateofconcern.org/ Get your classmates and friends in Kolkata and elsewhere to become members of this online youth community to fight climate change. Lets create a success story together! Regards. Venkatesh

Submitted by Paul on
Good post!. You're talking here about peak oil!