A post oil world gets less scifi by the day

Just think back to summer last year when oil prices spiked to $150 a barrel – 10 times the level of a decade earlier. In petrol stations in some European countries, people started to drive off without paying and drivers had to be banned from filling cars before they had paid up. In Britain, people stole heating oil out of the tanks that sit outside many houses in the country.

Imagine what would happen if prices rose, say, to $300 a barrel. Or higher. Not only would it become too expensive to drive unless absolutely necessary, but food would become prohibitively expensive to transport, goods from China would be too expensive to ship, and plastics, which come from oil, would be unaffordable. The cold turkey after more than a century of cheap oil would be painful indeed. For developing countries it would be fatal – many could not afford energy at those prices.

Oil has fallen sharply in price since last summer, but this is only because the world tumbled into its worst recession in decades, clobbering industrial output and trade volumes, and therefore oil demand. What is curious, though, is that oil prices, having tumbled below $40 earlier this year, went back above $81 a barrel last week, their highest for a year.

There are plenty of possible reasons, such as the continuing fall in the value of the dollar, in which oil is priced, or the piling in of speculators who think a recovery will push up oil prices. Or you could reach for the old chestnut of supply and demand. Demand has fallen a lot, sure, but maybe supply is not what it used to be. Indeed, take a graph of the oil price over the past couple of decades, chop off last year’s spike to $150 and this year’s plunge to $35 and you can see that oil prices have been on a steady upwards trend for a decade. The question is why?

Full article by Ashley Seager of The Guardian Story

Tags:  post oil world