Free (financial) markets have brought us to the brink of disaster. The current crisis is largely of our own making. The next will be all the more so. If we continue in the mistaken belief that free energy markets can smoothly manage the Great Weaning from oil, then we are in for a major shock. A shock which will certainly push our societies over the brink. No one can say where they will end up.

Until the middle of 2008, despite clear evidence that the financial cummunity had screwed up on a monumental scale, oil was still trading at around $140 per barrel. Since then, the price has collapsed to about $40 per barrel, due to the economic cirsis. This price fall may be of some help to struggling consumers but it is a catastrophe for the Great Weaning. Alternative energy sources, which were economic at $140 are simply impossible at $40. The price of oil has little to do with its real value or the strategic role it plays in modern economies. Unless we rectify this market blindness, we will all pay an extraordinarily high price.

 

There is only one way out of this mess, the price of oil has to be administered on a global basis. Agreement needs to be reached by 2010 at the latest, to set the global price of oil at $100 per barrel. Each year it would be increased by 10%, giving under 8 years for the price to double to $200. In fact, the price should not be set using any individual currency. Its price should be set using a common basket of currencies, which reflects the national share of gloal GDP.