Some energy sector analysts say oil could go as high $150 or even $200 a barrel in the coming decade, bringing on an age of fuel rationing and a deep economic downturn.
“The Wall Street Journal reported Thursday that the Paris-based International Energy Agency is trying to comprehensively assess the condition of the world’s top 400 oil fields, a review that could lead to a downward revision in its estimates of global oil supplies.” (Photo: gas lines during Arab oil embargo, Long Island, 1973-74)
(Oil is close to the $150 mark now and a downward revision in global oil supplies could cause the price to continue its rise.)
The oil crisis is real and, according to the experts, is going to get worse if nothing is done, which will cause protracted economic hardship in the United States and the world. This is the view of experts around the world in business, academia and government. See new blog, “America: When Oil becomes scarce, what then?”
The problem is that the world, according to some analysts, has reached “Peak Oil,” a point at which the amount of oil being taken from the ground has hit it’s maximum and is now declining. But the demand for oil is increasing and will continue to do so in the future, setting up a most unpleasant change in life style for Americans.
Stephen Leeb is president of Capital Management Inc., an investment advisory firm. In an interview with the Jackson Sun (May 22, 2008), he elaborated on some of the recent news causing angst among the world’s business leaders. The news was also the reason Bush was unsuccessfully begging the Saudi leader last week to let us have more oil.
Leeb: “You’ve got oil prices rising dramatically, but there is no evidence of increased supply. I mean in the last couple of months we have had both Saudi Arabia and Russia, which are the two biggest oil producers in the world, announce not in so many words, but certainly imply, that they have very little room left to increase oil production even going into the future…Oil supplies are limited, and that is a very serious situation.”
“I think the pressure is on us right now. If we don’t get a source of alternative energy program in place very, very quickly, there will be a lot of trouble. I still think it is possible to still save the day, but I think it is beyond the point where we can save the day without a lot of pain.”
Some have predicted $12 a gallon for gasoline in 3 or 4 years and it still might not be available at times. In that scenario, every part of the economy and the lives of Americans would be adversely affected. The streets would no longer be bumper to bumper and worthless Lincoln Navigators would be parked in driveways. Think about the consequences. And the problem would be long lasting. (Photo: These beasts will go the way of the dinosaurs.)
A study of the problem was sponsored by the Department of Energy in 2005, “Peaking of World Oil Production: Impacts. Mitigation, & Risk Management.” An executive summary included this statement;
“The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.”
- “The problems associated with world oil production will not be temporary…”
- “Oil peaking will create a severe liquid fuels problem for the transportation sector…”
- “Peaking will result in dramatically higher oil prices, which will cause protracted economic hardship in the United States and the world.”
- “In the developed nations, the problems will be especially serious. In the developing nations peaking problems have the potential to be much worse.”
- “Mitigation will require a minimum of a decade of intense, expensive effort…”
- “Intervention by governments will be required, because the economic and social implications of oil peaking would otherwise be chaotic.”
The oil supply problem will only get worse because less oil is being extracted and the demand over the next four decades will explode as 2.5 billion people in India and China become consumers. As of this moment, the oil won’t be there. The situation could become heated as nations fight for their share of the dwindling resource.
A more immediate problem for Americans is the price of fuel. Analysts vary in their predictions but all point to a continued rise in prices:
“Jeff Rubin, chief economist at CIBC World Markets, predicted oil prices will average $150 US in 2010 and $225 US (a barrel) in 2012.”
Doug Porter, deputy chief economist for BMO Capital Markets, said $200 oil would probably cause a global economic slowdown that would push the United States into a deep recession…” (Dan Healing, Canwest News Service, May 7, 2008)