The peaking of global oil production, or Peak Oil, will cause major changes in every facet of society, to include changes to the legal environment. As a brainstorming exercise, here is a survey of probable legal ramifications of Peak Oil:
Corruption Competition: The Foreign Corrupt Practices Act (FCPA) prevents US businessmen from bribing foreign government officials. Chinese businesses have no such burden. Will a scarce energy environment force modifications to the FCPA out of recognition of the need to compete with unrestrained actors such as
Infrastructure Attacks and Private Military Corporations: Peak Oil will increase the ROI for energy infrastructure attacks. While this will increase cost and risk to energy exploration and production companies, it will also increase the willingness to take on these costs and risks. One result will be an increase in demand for the services of Private Military Corporations (PMCs). The laws governing PMCs are ill-defined and changing quickly.
Regulation Juxtaposition – Peak Oil vs. Global Warming: In the broadest terms, the regulatory response to global warming will be to increase regulatory burden on energy exploration & production, whereas the response to Peak Oil will be to loosen the reigns. Which will win out? The one area that seems to win under either scenario is “efficiency,” though Jevon’s Paradox suggests that may not be a wise response.
Exploration in the Arctic, Antarctica, and Beyond-Continental-Shelf Regions: International-law issues surrounding newly joined contests for scraps of rock in the arctic will heat up, as will the debate surrounding resource extraction from
Nationalist Energy Subsidies and “Free-Trade”: Can Mexico’s protectionist constitutional clause that grants PEMEX a monopoly withstand a WTO challenge? Does US selective protection of sea lanes, or re-denomination of Iraqi oil in dollars represent a non-tariff barrier to trade? What about “diplomatic” and “political” pressures that end up piping oil or gas toward one market, and away from another? What about bio-fuel subsidies, or
Geo-Political Risk Insurance: Energy scarcity and rising energy prices will drive exploration and production in increasingly unstable environments. Geo-political risk insurance is emerging as a result, but the legal issues involved are often novel and always complex. Force Majeure clause, anyone?
Futures & Derivatives Markets: There is a huge, untapped domestic & international market for “consumer derivatives”--combinations of traditional energy futures bundled together and then sliced into very small packages to be sold to individual consumers to hedge against personal or small-business exposure to energy price changes. Want to lock in $3.00-a-gallon gasoline for your Suburban until 2012? Or heating oil, natural gas, even electricity? This may be the next financial instrument phenomenon along the lines of the “sub-prime mortgage” revolution, complete with all the legal issues of selling complex financial instruments to “Joe Commuter.”
Is the legal community prepared for the changes that Peak Oil will bring? I don’t think so. In a quick survey of all 11 law review articles every written (at least according to LexisNexis) containing the phrase “Peak Oil,” two have earnest discussions of Peak Oil (but don’t discuss any legal ramifications), five have off-hand references, and four only mention the term in a footnote. Peak Oil will change the legal landscape… expect a regular stream of “