Canute and the price of oil

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It probably wasn’t Benjamin Franklin who first claimed that only death and tax are certainties, but it would probably be safe to add ‘rising oil prices’ to the list.

The reasons are obvious – rising world population, aspirations for a rising standard of living, finite supply, and increasingly difficult and costly extraction.  Even if we haven’t reached peak levels of production yet, we will do at some point (and it’s certain to happen before we reach peak levels of demand unless there is a rapid and radical move away from oil, which seems unlikely).  There will be price variations en route, of course, but underlying them is an inexorable upward trend. 

The problem, and the reasons, may be most acute and obvious in the case of oil, but there is a more general issue around energy prices.  As we move to more sustainable energy generation – rather than simply exploiting the apparently cheapest sources – all energy prices are likely to rise.

And we need to be clear – this will not just be an absolute increase in prices in line with inflation, we’re looking at a relative increase as well, meaning that energy is likely to take a higher percentage of disposable income for many if not all.

For a number of reasons – some of them quite similar – food prices are also likely over the long term to increase as a proportion of disposable income.

There has not, to date, been much by the way of an open and honest political response to these issues.  Some politicians still talk as though governments can and should ‘do something’ to control price rises – hence the reference to Canute in the title.  Canute, of course, sat in front of the tide to prove to fawning courtiers that he could not control it; I somehow doubt whether that is the objective of those who are calling for control of food and energy prices.

So, two absolute basics of life, food and energy, are inevitably going to take a higher proportion of our disposable income.  Most of our political leaders know and understand this, but rather than tell us how we should be preparing for it, they continue to talk as though governments can control the prices – they fear that honesty would lose them elections.  They might well be right on that final point, but that doesn’t make it a valid excuse.

What governments can do is change the way resources such as food and energy are shared out – with the aim, as an absolute minimum, of protecting the most vulnerable in society.  Sharing simply on the basis of ability to pay (aka ‘market forces’) will provide no such protection.  That actually means that the underlying problem also contains a real opportunity to move towards a more equal society – if we’re imaginative enough to seize it.