Tuesday, November 27, 2007

How $100 Oil Could Help

How $100 Oil Could Help "As speculative fervor continues to test the $100 mark, fears that expensive oil could spur inflation and cripple consumer spending is spreading. Pricey oil—coupled with the subprime crash, shaky credit markets, Wall Street turbulence, tensions with Iran and a feeble dollar—could be the catalyst that topples the U.S. economy into recession." Okay... and I do hear a lot of people complaining about high gasoline prices. So the title of this article might seem astonishing.

"But doom and gloom is not the only upshot of $100 oil. In fact, many analysts see pricey oil as the jolt the economy needs to cut greenhouse gas emissions and foster more energy efficiency. That's because as oil gets costlier, the incentives rise for new investments in energy efficiency and renewable options." If you remember from high school economics there is this 'law' about supply and demand. A product with high demand but low supply like, say, Diamonds, will fetch a high price. A product with high demand but high supply like, say, Oil, will fetch a low price. But the picture of Oil as having a high supply is rapidly becoming false.

Supposedly, however, The Market offers us self corrective processes. Automatically as prices for a given product rise the people will find alternatives to that product. Hence expensive oil will, as the article says, be its own incentive for customers and businesses to seek alternatives whether it's greater efficiency or alternative fuels.

But the Market does not take into account all aspects of the problem. That is the price of Oil does not reflect the issues of environmental degradation or global warming or the mutual poisoning we are all experiencing. The Market only takes into account the price required to explore for oil, pump oil out of the ground, refine oil, ship refined products around the world, deliver it to refueling stations, etc. The price for oil doesn't even include the cost of the War On Terror which itself is most obviously a War to Secure Oil Supplies.

While I applaud high oil prices - because I know it's incentivizing my neighbors to begin thinking along the lines I've been pondering for years - I recognize that addressing the issue of high oil price is not going to address the entire problem.

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