Friday, July 21, 2006

$100 a barrel for oil?

Wake-up call to U.S. on oil?: Discusses a current worry that the fighting in the Middle East could cause the price for oil to become $100 per barrel. I think that's a very realistic concern, if we think about what's happened with the oil prices over the last couple years. The tensions in the Middle East have served to push up the price.

But that's not the only influence causing the oil prices to be so high as they are today.

There's growing oil demand from both India and China. Both countries are in a massive growth period, due to modernization of their economic activity.

There's the continuing rise in world oil demand, regardless of growth in India or China.

There's the peak oil consideration where it looks like world oil production capacity is going to soon reach a peak. Once the oil production peak is reached the price is inexorably going to go up.

The Chicago Tribune article is flawed by looking only at the immediate issue, and the immediate cause for oil price increases. If we think about those three effects, the price for oil is only going to rise. And once the oil production peak is reached, the price for oil is going to increase dramatically.


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