Friday, August 08, 2008

Oil Prices

There's an article on the BBC saying that oil prices could hit $200 within 10 years. Thing is, I think that's really, really optimistic. Look at this: in late February, oil prices hit $103. In July, they hit $147. That's not going to stop, and there are a few reasons for this.

First and foremost, there's simple supply and demand. China and India are still on the upward part of the curve with regard to oil use, and all the environmental policies in the world are not going to change that; industrialisation needs oil, and the Western-style status symbol of the car needs oil. So demand will go up. Supply - unless massive reserves are found under the Arctic ice - is going to go down, because there's a limit to the amount of oil that's there, and a limit to how fast it can be pulled out of the ground.

Second, the oil producers can see that they're onto the last of a good thing here. At this stage, with the peak of production either here, or already past, their livelihood is going to be gone in, say, twenty years' time. None of them are going to cut the prices much, and even if oil is a commodity, there are still people who can say "I'm not selling for less that $145, and that's final". And it will still sell, even as they up the price.

What the really sensible oil producers will be doing around now is gouging the oil industry for every cent they can get out of it, and pouring that money into developing solar and wind power, and ever-more-efficient batteries - and particularly, getting patents on the cutting edge technology in those areas. Once they have those nailed down, they'll be sorted for income for good.

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