The Coming Islamic Superpowers?

This weekend, our so-called leaders finally began using words like “crisis” to describe the oil-powered shotgun we Americans have stuck in our mouths. Many indications are that we’ve crossed the point of “peak oil” worldwide, and production is now diminishing by a couple percent per year. (According to the IEA, oil production is now in decline in 33 of the 48 largest oil-producing countries.) Couple this with skyrocketing global demand, and whether you think we have ten years or one hundred years of supply remaining, it means one thing for prices: an upward trendline until it is gone.

And we Americans, while good at many things, are not so good at planning ahead. So, we are likely to keep doing what we’ve been doing: driving our SUVs, full of cases of cheap Chinese goods, along our sprawly commuter routes from our well-lit downtown workplaces to our ARM-financed suburban homes until the music stops. I am not an economist, so I don’t know quite when the model “breaks” – but my hunch is that it’s closer to $100 a barrel than $200, and no matter where the breaking point is, we stand closer to it than we ever have.

I’d like to propose an idea that doesn’t seem to be in very broad circulation at the moment: the massively empowering effect of the imminent acceleration of wealth transfer from western societies to smaller Islamic nations such as Saudi Arabia, Iran, Iraq, UAE and Kuwait. Depending on the depth of supply, their relatively small populations will benefit much more than they have in decades past. This new wealth is capable of fueling unparalleled economic and technological growth and spawning major new social, economic and military powers on a scale never before found in that part of the world. We are now seeing new military glimmers of this in Iran, and it is not stoppable.

There’s been a great deal of chatter about China as the world’s “next superpower”, and it certainly has the population and potential to support it. But for this particular transfer of wealth, China is serving more as a moneychanger. Their own ballooning energy needs are forcing them to send their money (and ours) in the same direction – to the Middle East.

Well before the unstoppable price of oil wreaks havoc on the indolent American way of life, we will – like the addicts we are – continue to pay the going price for it until we drive off the economic cliff that supports our ability to do so. We have no other choice. Therefore, the incredible amounts of wealth that will find their way from Western economies into the coffers of sheikdoms and Islamic theocracies will make recently-bemoaned US oil company profits look like small change.

This could force the United States into an unenviable socioeconomic and military position. Having exported most of our wealth, and ultimately seeing the dollar’s back broken by the inevitable Euro-based oil trading we’re dying to prevent, we might no longer have the resources to outgun, outsmart, or outthink the rest of the world. Our ego will have some adjusting to do.

As a result of all this, more than one of these Islamic nations could ultimately emerge as nuclear and economic superpowers; several will become new centers of gravity for culture, the arts and technology; and their governments (elected or endowed) will wield more global power than they ever have before.

And how ironic would it be if this transfer of wealth enabled these nations and their young startup companies to engineer viable, sustainable ways out of the fossil fuel mess before the lights really do go out?

10 thoughts on “The Coming Islamic Superpowers?”

  1. The catch-22 though, Jason, is that if we create a sustainable energy solution and thus free ourselves and the world from oil, then the global demand for US dollars (which are the only way to pay for oil now, and thus must be held by every nation in the world that wants to buy oil), will plummet. If the demand for dollars plummets, so does their value, and the US system based on consumer and government borrowing collapses.

    In essence, the dollar is no longer gold-backed, it is oil-backed; which has been better for us. Foreign lenders who had accumulated dollars through our voracious borrowing could redeem their dollar notes not at the US central bank for stagnant gold bars, but for constantly-consumed oil, which is the lifeblood of every economy. With no need for the oil that backs dollars, there is no demand for dollars, and the mighty greenback quickly begins to become more like the lowly peso. Indeed, the very pro-US IMF is already now recommending that the dollar should suffer a devaluation to get things back in balance. To oversimplify, if the value of the dollar drops by 50%, we as a nation can only afford to buy half as much stuff as we do now. Could you live on half your present salary? Could your church, school, municipality survive with half their present budgets? What does America look like then?

    Just as we can’t afford to have Euro-based oil trading, we can’t afford to have oil replaced by people creating their energy locally from non-commodity-market-controlled sources like sun, wind, waves, etc. If they do, our currency withers and we can no longer afford our powerful military, our brilliant universities, our excellent roads, power, water, and telecom infrastructure, our schools, our well-paid jobs, our vibrant housing and mortgage market…

    Are you willing to sacrifice the wealthy, safe America we know for a world living on sustainable energy? Our boys aren’t dying in Iraq for oil, they’re dying for the very survival of the dollar, and thus, the United States.

    We’re out on a crumbling ledge, and rushing to renewables will just crumble it faster. Believe me, if the world finds an alternative to oil, the US will become extinct far, far faster than the polar bear. Is that a price you are willing to pay?

    For reference, just google things like “Euro oil bourse”, “IMF dollar devaluation”, etc. You have to be able to read some academic texts above a four-grade reading level, but the sobering information is there.

    For an easy read summarizing it all, you can start with The Proposed Iranian Oil Bourse By Krassimir Petrov. A touch viscerally America-bashing in his closing paragraph, but otherwise a very imformative primer on the issue.

  2. The catch-22 though, Jason, is that if we create a sustainable energy solution and thus free ourselves and the world from oil, then the global demand for US dollars (which are the only way to pay for oil now, and thus must be held by every nation in the world that wants to buy oil), will plummet. If the demand for dollars plummets, so does their value, and the US system based on consumer and government borrowing collapses.

    In essence, the dollar is no longer gold-backed, it is oil-backed; which has been better for us. Foreign lenders who had accumulated dollars through our voracious borrowing could redeem their dollar notes not at the US central bank for stagnant gold bars, but for constantly-consumed oil, which is the lifeblood of every economy. With no need for the oil that backs dollars, there is no demand for dollars, and the mighty greenback quickly begins to become more like the lowly peso. Indeed, the very pro-US IMF is already now recommending that the dollar should suffer a devaluation to get things back in balance. To oversimplify, if the value of the dollar drops by 50%, we as a nation can only afford to buy half as much stuff as we do now. Could you live on half your present salary? Could your church, school, municipality survive with half their present budgets? What does America look like then?

    Just as we can’t afford to have Euro-based oil trading, we can’t afford to have oil replaced by people creating their energy locally from non-commodity-market-controlled sources like sun, wind, waves, etc. If they do, our currency withers and we can no longer afford our powerful military, our brilliant universities, our excellent roads, power, water, and telecom infrastructure, our schools, our well-paid jobs, our vibrant housing and mortgage market…

    Are you willing to sacrifice the wealthy, safe America we know for a world living on sustainable energy? Our boys aren’t dying in Iraq for oil, they’re dying for the very survival of the dollar, and thus, the United States.

    We’re out on a crumbling ledge, and rushing to renewables will just crumble it faster. Believe me, if the world finds an alternative to oil, the US will become extinct far, far faster than the polar bear. Is that a price you are willing to pay?

    For reference, just google things like “Euro oil bourse”, “IMF dollar devaluation”, etc. You have to be able to read some academic texts above a four-grade reading level, but the sobering information is there.

    For an easy read summarizing it all, you can start with The Proposed Iranian Oil Bourse By Krassimir Petrov. A touch viscerally America-bashing in his closing paragraph, but otherwise a very imformative primer on the issue.

  3. Everything is tied together. Gold is flying as high as oil. Copper, too. The Chicago exchange is having a hayday. Don’t just look at who is making money on oil, look also at who is making money on contracts, on services, on shipping, and on commodities. That is where it is fun to look.

    Follow the money.

    Harry is right. Sustainable energy is just stealing from Peter to pay Paul.

    It will aid the individuals who are early adopters, but when these initiatives become national or global solutions, there will be just the sort of blowback that Harry mentions.

    The market is too smart — and is too interconnected — to fall for the “sustainable energy” solution.

  4. Oh, and there is way too much money to be made to let the whole sustainable energy market become institutionalized. Agribusiness can ignore a lot of backyard personal gardens — can suffer them without the flattening of growth — but when the point of pain happens, then agribusiness might not be so kind.

    The important thing to try to do is to find a replacement profit center for these investors — sort of a methadone — who are now invested in fossil fuel.

    Organics worked for agribusiness. What will the methadone be for energy?

  5. Everything is tied together. Gold is flying as high as oil. Copper, too. The Chicago exchange is having a hayday. Don’t just look at who is making money on oil, look also at who is making money on contracts, on services, on shipping, and on commodities. That is where it is fun to look.

    Follow the money.

    Harry is right. Sustainable energy is just stealing from Peter to pay Paul.

    It will aid the individuals who are early adopters, but when these initiatives become national or global solutions, there will be just the sort of blowback that Harry mentions.

    The market is too smart — and is too interconnected — to fall for the “sustainable energy” solution.

  6. Oh, and there is way too much money to be made to let the whole sustainable energy market become institutionalized. Agribusiness can ignore a lot of backyard personal gardens — can suffer them without the flattening of growth — but when the point of pain happens, then agribusiness might not be so kind.

    The important thing to try to do is to find a replacement profit center for these investors — sort of a methadone — who are now invested in fossil fuel.

    Organics worked for agribusiness. What will the methadone be for energy?

  7. Interesting thoughts, Chris, but you are missing the point a bit. I’ll remediate for you so as not to confuse you any more. The point is that The American Way of Life is completely dependent on oil. Not dependent in the “I Love My SUV and My Central Air Conditioning”, but dependent in that dollars are oil, and dollars are what allow America to exist as it does. No Petrodollars and America looks likes Mexico, except really cold in the winter.

    As I said, we are on a crumbling ledge, and unless some really smart people come up with a really new idea, and leaders with really strong character drive it through, America is going down. We only function because China, Japan, and other foreign countries buy up our Treasury bonds to give us debt to finance our system. They stop buying, we stop functioning. If the world stops needing oil, or stops needing dollars to buy oil, the world stops lending us money, and our system grinds to a halt quick.

    There is no methadone for the energy changeover. It’s going to hurt. If we stay on petroleum, we get a century of oil wars then the ecosystem collapses and a lot of the world becomes unlivable, then the dollar along with everything else collapses. If we get off petroleum and go to renewables, nobody needs dollars to buy oil, the currency collapses, our economy crumbles, our military starves, and America becomes a poor debtor nation nobody fears. The bright side of the latter option is that maybe then the ecosystem doesn’t collapse and you can at least go work as a garbage man in a rich Arab country or perhaps a maid in China.

    You don’t like this? Want to know what to do? Get off the sinking ship. Diversify yourself globally. Get your assets in Euros. And for God’s sake, get out of the US housing market. That’s going to be a disaster before your kids finish college (that’s another primer in basic economics – perhaps some other day). Once you’ve done that, work for a move to renewables even if it does tank America – at least you won’t be going down with it, and you might still have a pleasant planet to enjoy your retirement on.

    As for Petroleum Oil An Organic Renewable Resource, yes Chris, it is. It just takes millions of years to renew itself, and it’s your bones it will make itself from, so it’s not much of a solution for this century.

    The ecosystem’s falling apart – everyone who’s not illiterate or delusional now recognizes that. And America’s at the precipice with no one yet sure of how to back away from the edge – everyone with a bit of economic understanding beyond the undergrad level recognizes that. We might be able to battle on for a few more decades before our borrowed Petrodollar-dependent system collapses, but I wouldn’t go buying my retirement home in the US, and I wouldn’t buy it a low-lying coastal area.

  8. Interesting thoughts, Chris, but you are missing the point a bit. I’ll remediate for you so as not to confuse you any more. The point is that The American Way of Life is completely dependent on oil. Not dependent in the “I Love My SUV and My Central Air Conditioning”, but dependent in that dollars are oil, and dollars are what allow America to exist as it does. No Petrodollars and America looks likes Mexico, except really cold in the winter.

    As I said, we are on a crumbling ledge, and unless some really smart people come up with a really new idea, and leaders with really strong character drive it through, America is going down. We only function because China, Japan, and other foreign countries buy up our Treasury bonds to give us debt to finance our system. They stop buying, we stop functioning. If the world stops needing oil, or stops needing dollars to buy oil, the world stops lending us money, and our system grinds to a halt quick.

    There is no methadone for the energy changeover. It’s going to hurt. If we stay on petroleum, we get a century of oil wars then the ecosystem collapses and a lot of the world becomes unlivable, then the dollar along with everything else collapses. If we get off petroleum and go to renewables, nobody needs dollars to buy oil, the currency collapses, our economy crumbles, our military starves, and America becomes a poor debtor nation nobody fears. The bright side of the latter option is that maybe then the ecosystem doesn’t collapse and you can at least go work as a garbage man in a rich Arab country or perhaps a maid in China.

    You don’t like this? Want to know what to do? Get off the sinking ship. Diversify yourself globally. Get your assets in Euros. And for God’s sake, get out of the US housing market. That’s going to be a disaster before your kids finish college (that’s another primer in basic economics – perhaps some other day). Once you’ve done that, work for a move to renewables even if it does tank America – at least you won’t be going down with it, and you might still have a pleasant planet to enjoy your retirement on.

    As for Petroleum Oil An Organic Renewable Resource, yes Chris, it is. It just takes millions of years to renew itself, and it’s your bones it will make itself from, so it’s not much of a solution for this century.

    The ecosystem’s falling apart – everyone who’s not illiterate or delusional now recognizes that. And America’s at the precipice with no one yet sure of how to back away from the edge – everyone with a bit of economic understanding beyond the undergrad level recognizes that. We might be able to battle on for a few more decades before our borrowed Petrodollar-dependent system collapses, but I wouldn’t go buying my retirement home in the US, and I wouldn’t buy it a low-lying coastal area.

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