Quasi Scarcity: Between Abundant Resource but in Due Balance and Scarcity of Resource

Quasi Scarcity:

Between Abundant Resource but in Due Balance and Scarcity of Resource

Rahma Suci Sentiia

The ‘limited production’ of oil resources, together with scarcity resource paradigm believed  by many countries – the quasi scarcity^[1]- has driven the resources price tend to up and up over long periods (as shown in the graph below, EIA 2013). Although the oil production increased by US from Oct 2009 to 2015, it does not significantly lower world oil price. In this short essay, the theoretical concept of abundant of resource versus scarcity of resource with oil resource as an example will be discussed. After that, the further analysis will be made on the effect this concept to different societies as well as solution.

Source: http://www.eia.doe.gov/ipm/supply.html  (2013). The table shows the rate of production still remain stable but the price rate increase over period.   

Theoretically, the implementation of scarcity of resource concept directs people to allocate resource efficiently. It will reduce the amount of resource available from market, demanders take a ‘short term’ mind-set to have it as much as possible, which in the end will drive the price up, recession, and drop to a lower standard of living. Countries prefer applying this concept because it will generate more revenue to the exporters.

The basic logic of implementation of this concept is usually to control human want. However this concept will be resulted with a higher price, fear and greedy human. This logic is common logic based on economic theory, however multidimensional analysis shows that the resource is never finite. In fact, we now live in the global modern economy, with advance technology and knowledge combined with the existing resource, we can create oil more than we expect now (and it’s applicable for all resources).

As the illustration, let say since Saudi Arabia can produce abundant oil and export more than 8.865.000 bbl/day due to its generous supply. From scarcity concept, Saudi will limit their production but other oil import countries (e.g. Indonesia) will demand more and more because of panic and will be dependent to other country. This will leave Indonesia vulnerable to be exploited with price manipulation. This is not wise concept to implement. On the other hand, from abundant of resource concept, Saudi may control the production in balance, not exploit the price. Indonesia will sufficiently demand, think and act more creative how to create alternative oil from other resource. The advanced technology now detects that Indonesia has huge amount of ‘Jarak plant’ (Janthropa curcas) that can be alternative but it needs more advance technology and should initiate by government. It is similar with Islamic perspective that resource is ‘abundant but in due balance’. This concept encourages people and country to be more calm, creative, explore their knowledge, and use resource in balance without suffering ‘scarcity fever’. In regards to this condition, there are options which should be implemented by countries around the world.

Firstly, every country should promote more research in crucial production technology as well as implement the newest alternative resource. Many countries with generous alternative resource supply, but lack of advanced knowledge still use traditional method. Thus, as proposal, under OIC countries, a common research unit can be established. It can conduct research whose results can be used together freely by any country in the world.

Secondly, a regulating international agency under OIC should be established. The task of this agency is to control any countries which engage in anti-competitive behaviour, such as price exploitation. Currently, there are big economic gap between The Least Developed Members of the OIC (LDC) and Fuel Exporting Countries (FEC). Thus, to enhance their brotherhood of OIC, the establishment of this type of agency is understandable and highly needed.

To conclude, scarcity concept lead to exploitation and society suffer from ‘scarcity fever’, however ‘abundant resource but in due balance’ result in boosting the potency of society to be more knowledgeable and in line with the life balanced. The people should convey its paradigm assertively because scarcity is just ‘quasi scarcity’. World countries (e.g. OIC) should promote more research as well as the establishment of controlling internal agency on resources. (Sentia)

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[1] The Writer prefers to call this limited production as ‘quasi-scarcity’ which is  not real scarcity, but it is just the scarcity thinking of human that make them to limit the production as if it is finite.