The Causes of the Diminishing Economic Power of Oil and Its Consequences

The economic power of oil has perhaps diminished in recent years: oil prices have plummeted, the realization of the impermanence of fossil fuels has led to alternative fuel innovation, and nations are hesitant to be too reliant on oil-bearing countries. However, this problem is more controllable than is often assumed. Part of the oil industry's diminishing power is due to the industry's wasteful, unsustainable practices.

Oil as a resource is quite undeniably becoming more scarce and less reliable. Rob Hopkins explains in his TED Talk that we only discover one barrel of oil for every four barrels of oil that we use.

Only 33 oil-producing countries have not passed their peak, and oil is almost one tenth as efficient today as it was in the 1930s (R. Hopkins 2009). Unfortunately, the reliability of oil is declining rapidly.

Because of this, economies are adapting quickly. According to The Economist, we will become less and less dependent on petrol as time goes on due to caution about its lack of reliability.

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Many cars and products will use alternative fuels and less oil; some products will not use any oil at all. As of 2013, natural gas was making large gains in the transportation sector: two large engineering companies, Caterpillar and GE, powered their railway trains with natural gas, and a fifth of American buses and two fifths of American garbage trucks ran on natural gas ("Supermajordämmerung" 2013). This shift away from the trustworthiness of oil will harm the oil industry, and make it significantly less powerful in the global economy.

However, this diminishing power could be curbed by the oil industry to keep oil a more powerful tool in the global economy. To do this, oil companies must cut back on their abhorrent waste and become a more efficient, sustainable industry. According to Cyrus Sanati quoting IPA, the oil industry had "destroyed value versus initial expectations on 75% of all projects completed in the last decade," leading to a loss of 35%. Additionally, engineering mistakes in the oil industry have become a large problem, doubling in the last few years and harming the industry. Excessive spending also contributes to the waste in the field; issues like reckless luxury for employees and extravagant industrial structures are wasteful and cause the diminishing power of oil (C. Sanati 2015). Much of the oil crisis may be out of the hands of the industry, but to fight their diminishing power, they must cut costs and slim down their business practices.

Emerging markets often lean on oil as an easy way to stay financially stable and globally powerful. Cuba, for instance, plans to drill for oil to stabilize its re-entry into the global economy (A. Tully 2015). However, this method will only be effective if the diminishing power of oil is slowed down. The oil industry has the power to mitigate its descent in power, and in doing so, will promote the economic growth of emerging markets like Cuba.