Saturday, 16 January 2016 22:28

And now comes the hangover

There have been good prices for commodities during the last decade: oil, gas, minerals, agricultural products. Now prices have plummeted. This implies a sea change as commodities are again a buyers' market, as it has been the case for most of the second half of the last century. It tips the correlation of forces in favour of the developed countries against the developing countries, which are generally heavily dependent of the export of commodities. But some developed countries are suffering too.

The Paris summit ended with an agreement, fortunately. Not good enough to save our grandchildren from climate disaster, but at least a beginning, which we hopefully will be able to build upon. Apart from the climate change deniers, who live in their own claustrophobic world, much of the disagreement is about justice: which are the countries to blame, and which should clean up their acts first? The Paris summit tried to avoid the question of justice and convince us that we all have to contribute, including the developing countries. And the developing countries seem to have gruntingly accepted that.

Independently of the outcome of the Paris Climate Change summit, big oil and coal have started an irreversible decline, facing the competition from renewable energies and an increasing political pressure to de-carbonize our societies. This changes completely the game and eliminates the incentive to reduce supply to get higher prices. In stead, the rush is now to exploit the oil and gas before it is too late. Who comes too late, loses. So OPEC has lost its power for good, and there is no chance it will get it back again.