The price of oil will rise considerably over the next 20 years and the islands of the Federated States of Micronesia, because of their import dependent economies, will be considerably affected. We are all part of a global fossil fuel based industrial civilization, and virtually everything we use in our lives depends on petroleum fuel. As the price of oil increases, so does the cost of everything else. The world's oil supply is dwindling and some experts say that 2005 may be the year of the peak production of global oil, meaning that from this year onward the world's oil supply can only decline. There's a debate about when the world will actually run out of petroleum, and many experts feel that it might take 30-60 years depending on global oil consumption, but the world is already feeling the effects of higher oil prices.
Recent increases in the price of oil have already impacted Micronesia in the form of the curtailment of certain shipping activities and airline routes and higher prices in our stores. Imagine what it would be like for us if sometime in the not too distant future we only get one container ship every few months and airline flights one or twice a month. What happens when the lights, refrigerators, televisions and computers go out because there's no diesel fuel for our power plants?
Compact II was negotiated with a certain stable economic future in mind, a future that did not sufficiently include the factor of dwindling global oil supplies and the rising price of virtually everything we use. So the economic and financial premises on which Compact II was built may be altered or even cancelled out altogether. In other words, the amount of money we receive from Compact II may not be able to do what it was supposed to do 5, 10 or 15 years from now. Also, 20 years from now the amount of our post-Compact self-sufficiency Trust Fund may be too low in the future global economic scenario of decreasing oil supplies and rising costs for everything.
Public sector planners will increasingly need to consider the implications of rising oil prices because the Compact funds, which largely support the government sector, are fixed at a certain level regardless of major changes in the world's economy. State and National Government should be wary of expansion, while looking for ways to control costs in a future of higher prices, scarcities and curtailments of services.
Now for the good news - there are three hopeful alternatives to a future of traumatic social, economic and political disruptions caused by the end of cheap oil. First, become less oil dependent by using alternative energy sources. Second, become less import dependent by growing more food, catching more fish and processing and marketing more things locally. Third, let's all hope that science and technology is able to solve some of our problems, for example by developing synthetic fuels for machines and improved seeds for growing food.
There are residents on Pingelap and Mokil who already have solar powered houses, and the College of Micronesia-FSM recently began taking a serious look at alternative energy such as solar power and wind power for its buildings. Solar power has already been successfully tested and used around the world. It is an excellent alternative energy source for us in Micronesia because we have lots of sunshine. Even on a dreary, rainy day there is enough sunlight to generate electricity with the photovoltaic panels that are used.
Solar power panels, which can be easily placed on the roof of a house, turn sunlight into DC current electricity, and then a step-up transformer converts this DC current into the AC current of our typical 110volt plug sockets. Sunshine can run your light bulbs, refrigerators, televisions and more. For a reasonable price a home can be converted to solar power. It's a good opportunity for private sector entrepreneurs to bring in alternative energy solutions, such as solar and wind power kits, which they can sell, install and service, thereby helping to make a better future for us all.
In the past I have written about the need for authentic economic development in the FSM, meaning production-based activities such as commercial agriculture, fishing and local processing and marketing. The Japanese period showed us the economic potential of islands like Pohnpei, where many successful commercial crops were grown and processed. The islands of Micronesia certainly have limits on possible economic development, but the states of the FSM have not yet come close to realizing their agricultural potential.
A recent survey found that there are only between 20-30 serious commercial farmers on Pohnpei for a population of roughly 36,000 people. Yet local stores and restaurants can never get enough local fruits and vegetables. Pohnpei has a strong market for agricultural products of many kinds. In the future scenario of scarcity, the states of Yap, Chuuk, Kosrae and Pohnpei will need to grow more food. The people with the land and know-how for commercial agriculture will have excellent opportunities to make money while supplying locally grown food to the people. In a production-based local economy where more people are farming, fishing, processing and marketing locally, more money will stay at home and circulate on the islands rather than being spent on overseas imports.
To ensure a more prosperous future for the FSM, business and government need to start planning now. The banking sector can also assist by making easy term loans for people wanting to invest in economic activities and alternative energy technology. If we act today we can be more prepared when the lights start to go down. Growing food, fishing, processing and marketing locally, and using solar or wind power are keys to adapting to a future without cheap oil.