Riding to the Unknown
Crude oil, considered as the lifeblood of the industry, unquestionably plays an indispensable part in production, permeating all walks of life. It can be found in plastic, cosmetics and fabrics required in daily life, in petrol and diesel that drive vehicles and airplanes, in fertilizers and pesticides utilized in cropland, and in various sorts of weapons. The scarcity of crude resources and its widespread use in all fields combine to jack up the prices, and trigger countless violence and conflicts.
Rare as it is, humans have been desperately seeking for an alternative, or simply praying for a slightest decrease in oil prices. Due to the pandemic, people are inclined to live a more environmentally friendly style of life with the support of zoom and social platforms. Thus, the
introduction of electric cars and solar panels do lead to a sustainable fashion. In early 2020, a furious price war between Saudi Arab and Russia, two of the world biggest exporters of crude oil, dragged the rocketing price down by more than half, according to The Economist(1).
Nevertheless, we can neither trust in the unpredictable virus, an immature technology nor the gambling politicians. Influenced by the war between Russia and Ukraine, the crude oil WTI soared to $123.7 per barrel on March 8, followed by a significant fall and an 8% rally to $104.7
per barrel on March 18 as Russia and Ukraine failed to reach a consensus in the negotiation, adding that the U.S. and its alliance spared no effort to upgrade sanctions against Russia, which gave rise to increasing panics of the disruption to oil supply(2). Risk aversion unavoidably
transformed shortage in supply into high equilibrium prices. The high crude prices may cause inflation. In terms of internal trade, thanks to crude oil’s essential role in modern society, the production cost rises, so as the price of all relevant products and services, such as plastic and diesel. As a result, both investments and production surge. At the mean time, consumers may search for substitutes, which brings about inflation as supply remains the same. As people’s living costs have been lifted, manufacturers are forced to raise salaries, and labor cost increases as well, which then makes a pernicious snowball. In terms of external trade, as exporters receive much cash flow, importers’ foreign exchange reserve rockets, which indicates currency devaluation. Though the government can inhibit the heating economy by tightening monetary policies, the
outcome may not be satisfactory in the long run. After all, we can never quench a thirst with poison. It is the resource itself that really matters. Human races will possibly find other sustainable resources as replacement, but the technological barrier will in turn prevent equal distribution. How should the powerhouse rule this world? Do we really need a so-called powerhouse?
By Jennifer Junzhi Liu
