With world oil prices at their lowest in four years, another Great Sorting has begun. Which nations, businesses, or people will benefit? Which will suffer?
The better question to ask, however, may be this: Is the world better off when oil prices fluctuate with high uncertainty?
For oil giants like Saudi Arabia, which want to keep their share of the market, creating price volatility has been a frequent strategic move. It scares off investments in costlier alternatives to the cheap crude of the Middle East. Last week, for example, the Saudis forced the Organization of Petroleum Exporting Countries to let prices keep falling rather than put a floor under them by reducing OPEC production. The cartel’s move may be designed to curb spending on drilling for oil and gas in shale deposits, which has upended assumptions about the future of oil.
Analysts are now having an oil-field day forecasting the outcome of this price struggle. Ever since the 1973 Arab-led oil boycott, one of the world’s greatest uncertainties has been the future price of oil. Even without Saudi meddling in markets, the price at the pump has seemed less predictable than wars and financial panics. Yet as each new “oil shock” became less shocking, the uncertainty over prices has created a search for certitude.
This quest has helped spawn innovation in new energy technologies, such as fracking and electric car batteries. It creates more openness in information on oil markets. It encourages creative ideas on how to end the world’s dependence on fossil fuels and thus curb greenhouse gases.
Scholars who study risk refer to “bad uncertainty” and “good uncertainty.” The creation of the Internet, with all its possibilities for humanity, is an example of good uncertainty, as are some Wall Street’s financial products that thrive on uncertainty. The risk of war in an oil-producing nation, such as Libya or Iran, is bad uncertainty.
The task in dealing with the uncertainty of fluctuating realities is to find the timeless truths and an underlying harmony.
“In an age when human beings can travel into space and map genomes, ideas and methods for understanding and managing uncertainty are comparatively unsophisticated,” write Gabriele Bammer and Michael Smithson in a 2008 book, “Uncertainty and risk,” that looks at how various disciplines from jazz to physics deal with inexactitudes and probabilities.
As oil prices change once again, the Great Sorting is really between those who use uncertainty to create a better world and those who succumb to it like a game of chance. The former operate out of a conviction of inevitable good. The latter are prisoners of false assumptions about progress. The best among us must find the inviolate amid the volatility.