The insatiable needs of man have made him continually interact with his environment. Through his ingenuity and imagination, he has continued to recreate the kind of world he desires for himself. He learns new ways and uses them to modify his ambience according to his needs to live well. His ability to build on previous events is phenomenal. However, an unquenchable quest for new discovery and invention is often seen to devalue and destroy his previous ingenuity, invention and legacy. Since the emergence of the modern capitalist theory which was greatly influenced by Adams Smith’s 18th-century Wealth of Nations; our world has not remained the same. Capitalism has brought out the best in humankind. It has led to an unprecedented increase in new ideas, knowledge and wealth over the past centuries and our world is continuously regenerated. The future is actually laden with better discovery and this is commonplace. We shouldn’t be Luddites.
However, capitalism has its own pros and cons. This is corroborated by the Swedish economist and writer, Fredrik Erixon. In his words: “capitalism could boost innovation like no other system. In the end, however, capitalism would become a casualty of its own success: it would innovate itself to death”. The fact still remains that many great ideas and innovations have been destroyed by new ones. This is one of the fundamentals of capitalism. Old glory and legacies are lost to new ones. Erixon does not hide his reservations about capitalism. He puts it: “…..and all that are solid would melt into air”. A very good illustration of this is how internet has relegated fax machine, postal services travel agents,,etc. to the background. In the same vein, the 19th century Industrial Revolution in manufacturing reduced 41 percent of the American labour force in agriculture to 3 percent by 1980. This is not different from Joseph Schumpeter’s constructive destruction.
Joseph Schumpeter (1942), describes constructive destruction as the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” Constructive destruction is a theory of economic innovation that describes the deliberate dismantling of long-standing and established processes, procedures, services in order to make way for improved methods and approaches. Schumpeter, observes that creative destruction is an engine of capitalism that may cause imbalance and chaos. The chaos often results from job losses, companies going out of business, lost technology and efforts, etc. He however believes that these negative outcomes are necessary to usher in new solutions and improvement in quality of life. To him, everything is towards progress and a better standard of living.
Throughout history, five economic surges of disruptions have been identified. The first phase was induced by water power, the second by steam power, the third by coal and electricity, the fourth by oil and gas and the fifth by the digitization of the economy. Probably, the next stage will be induced by renewable energy. Still on the digitization of the global economy. One may not be surprised at the gale of constructive destruction going on in every sphere of our endeavours. For the records, Most industrialized nation’s are focused on the digital economy at the expense of agricultural and manufacturing sectors. The current list of Fortune 500 companies gives credence to this assertion. The list contains more service companies and fewer manufacturers than ever. For instance, the UK service sector contributes around 80 percent of GDP. In the United States, data shows that agriculture contributes 0.86 percent, the industry contributes 18.47 percent and service contributes 76 per cent.
The future is here. Already, the digital revolution and transformation being experienced in artificial intelligence (AI), robotics, drone tech., ICT, smart-city, cloud computing, etc., suggest where the global outlook is tilting to. With satellite clinics, health care is no more confined. Transportation, media, entertainment, banking and financial services are all going digital. Amazon, Netflix and other streaming companies are edging out rental stores, movie houses, etc. CD manufacturers are also closing shops because of the digital music vendors. By the time robots and artificial intelligence, enhanced jobs take the centre stage, I wonder the kind of jobs that would be left for humans. Who will not grab the kind of economy of scale and opportunities in digital economy? IBM, the American computer hardware and component tech company is said to be prioritizing its cloud-based business. Recent observation suggests that 60 percent of the company’s revenue comes from service-oriented activities. You don’t even need ships to move your goods from one hemisphere to the other. The whole world has become a service-centred web of activities and everything has become automated.
The unchallenged fossil fuels (coal, oil, and gas) dominance as the most prominent global energy sources is being threatened by global warming awareness and other environmental challenges. The paradigm shift from carbonated energy to a green economy is spurring unprecedented innovations in renewable and emissionless fuels which will lead to a decline in fossil fuels demand. This is what is referred to as a carbon bubble in some quarters. The implication of this is that fossil fuel reserve, facilities and assets will become stranded (stranded assets). It is envisaged that more than 30 trillion investments will be stranded when the bubble bursts. Where is the interface between fossil fuels and climate change? Oil, a mixture of hydrocarbon, contains carbon dioxide (CO2) that emits 80 percent of the greenhouse emissions that cause climate change. Climate change awareness is one of the most prominent Geopolitical events of the 21st century. If drastic measures are not taken to stop carbon dioxide emissions, the whole ecosystems may be lost. Already, ocean rising, rising sea levels, hotter days, species extinction, erosion, reduced rainfall, drought etc., are becoming frequent. Needless to say, the Carbon bubble is needful to savage mankind.
Nevertheless, the molecules of carbon dioxide present in fossil fuels are like bile in animals. Bile can render a whole animal inedible and acidic if not handled properly. It is painful that fossil fuels, especially oil, will soon get devalued because of the presence of carbon dioxide. This is a commodity that has lubricated the global economy for decades, contributed immensely to the wealth of nations, as well as, many multinational companies. Yet, the substance will soon be devalued because of carbon dioxide. No doubts, the cliche end of an era is relevant here. Many countries will be affected, especially Nigeria. Oil has sustained our nationhood for over 60 years! If the commitments and the modus vivendi among the 195 members of the Paris Agreement, 2015 global pact to mitigate the effects of climate change is anything to take serious, carbon bubble Maybe nearer than thought.
For instance, Britain has already codified its climate change programs into law. It also aims to attain net-zero emission by 2050. More countries are following suit: Norway aims to reduce net carbon emissions by 2030, Finland targets 2035. Even China the biggest culprit has promised to attain net-zero before 2060.
Oil-reliant countries like Qatar, Kuwait, UAE, and Saudi Arabia are planning to diversify their economies. Saudi Arabia’s Saudi Vision 2030 strategic economic blueprint is a step in that direction.
The strategic thinking and the paradigm shift is not country-specific. Major multinational oil companies are also following suit. Many of them have Incorporated renewable energy into their portfolios by turning to integrated energy companies. Østerd, a Danish-based energy company exemplifies the transformation going on in the oil sector by changing from fossil fuel to an offshore wind energy company. Today, it’s the world’s largest offshore wind farm company. Research is also intensified in renewable energy and other low-carbon energy sources like solar, biofuel, biomass, geothermal, wind, electric vehicle (EV), etc.
So many uncertainties in the stratosphere. Yet, there are many questions begging for answers. Will the digital economy envelope manufacturing and agricultural sectors totally? Has an end come to the economic significance of oil/petroleum as a tradable commodity? I guess the answer is no. There is a residual zone of redemption in these sectors despite the decline in their value and relevance.
When Covid-19 began to take its toll on the United States’ economy during the previous year global lockdown, China exported medical equipment worth 5 billion dollars to the United States. This is not unconnected with the deliberate slowdown in the US manufacturing sector. Lately, most of the American manufacturing giants have moved to China for some reasons. This paved ways for China, India and others to intensify their manufacturing enterprise. Who could have envisaged that an emergency period such as Covid-19 lockdown could come? China became the bride everybody was looking for because of its status as the biggest manufacturer in the world. This had actually taught America some lessons that every sector is important.
As far as human existence continues, manufacturing will continue to be relevant. A lot of opportunities will spring up there because of the vacuum created by the digital-economy focused developed countries. Again, innovations in tech sectors will rub off on the manufacturing sector. It will lead to crossbreed industrial products. Already we have begun to have a smart TV, smart car, and what have you. Robots and artificial intelligence will also enhance industrial activities greatly and better products will be produced.
Can we exist without food? Aside, the probative value of cash crops such as cocoa, coffee, sugar, wheat, soya beans, among others, cannot be overemphasized. The reason why agriculture will continue to be important. In fact, some of these agric products will be used to produce renewable energy such as biofuels. Innovations are equally going on in the agric sector. There is Agric-tech and digital-agric which are off-shoots of technological innovations. For me, this is a new world, everything is intricately interwoven. It is now left for emerging countries like Nigeria to utilize the residual opportunities in these zones.
No doubts, the monopoly enjoyed by oil/petroleum as the most valuable commodity at the world market will be defeated when renewable energy takes centre stage. But Reduction in value does not mean extinction nor quietus. Fossil fuel is just one of the numerous derivatives of petroleum. Over 6 thousand household products are made from petroleum. Climate Change or not, industrial usage of oil is inevitable. Withal, Innovation is key here.
I think the future relevance of oil will depend on a number of factors: innovations, value-addition and regeneration. Who could have thought that electricity in form of electric vehicle (EVs) would one day replace oil?
All is said. But where is Nigeria in the scheme of things? Where are the dividends of oil leverage over the years? Poverty and hopelessness. Worse still, why other countries are utilizing the various opportunities in blockchain technology, ICT and the rest, we are busy shutting our window from the rest of the world. The recent Twitter ban is nothing short of automation angst and tech-allergy. Our electoral process speaks volume of our tech-lethargy. With the common electronic transmission of votes, the unnecessary violence that greeted the previous elections would be reduced. But what do we have? The legal framework to that effect is foot-dragging at the National Assembly. For me, our problem with oil is not its imminent future decline, but with how we have handled it over the years. Ineptitude. Nonetheless, we are not ready to learn our lessons.
No country attains prosperity by depending on primary goods. And that has been the bane over the years. We are not where to be found in the whole petroleum value chain. We lost huge revenue when we don’t partake in mining, logistics, refining, etc. Value-addition is where the money is. For example, Cocoa is bought from Africa at an infinitesimal amount, turned into chocolate by European companies and sold at exorbitant prices.
I sincerely hope we change our ways and prepare for the future. The future is actually bright. According to a report, in 1960, the world’s population was 3 billion. In 2021, it is 7 billion. By 2060 it is projected to be 11 billion. With this kind of projected intimidating population, manufacturing and agriculture cannot be displaced. Who will provide their foods? Who will manufacture their textiles, cars, and other needs? The envisaged geometric increase in global population is the future greatest asset.
As long as we live in a capitalist world, innovation, new products, new thinking, and competition will continue to be part of our existence. The tide will only erode those who chose to remain stagnant.
Source: Tribune
