The price of crude oil continues to rise. It has now reached nearly $100 a barrel, which is not unexpected, and I expect that prices will continue to rise. Most OPEC members argue that there is no shortage of oil and that the price rise is not alarming. Of course it is in the interests of any oil producer to charge what the market will bear for a commodity, which is both finite and becoming increasingly expensive to obtain in a world where population growth and economic growth requires more energy, and oil is a key source of energy.
The International Energy Agency regards the price of oil at current levels as “alarming” according to press reports. The alarm bells are ringing because it is feared that a further oil price rise would provide a setback to economic recovery.
My view is that the sooner that the economies of the world get used to high oil prices, the better. Oil and other fossil fuels, while important, are no longer the only source of energy available. Renewables will, over the next few years, provide a significantly increased proportion of energy used both in the developed and developing nations of the world.
The extraction of oil is always environmentally damaging, despite what the publicity of the oil companies claim, and its use is also environmentally damaging, to the extent that it may well become environmentally threatening if we do not curb our consumption of it.
I do not subscribe to the view that oil at $100 a barrel threatens economic recovery; two years ago oil reached over $140 a barrel and it was not a high oil price that brought about economic recession, but the antics of bankers using other people’s money to leverage financial transaction that they did not properly understand, causing a redistribution of some wealth, particularly from poorer people who trusted those to whom they entrusted the management of their savings.
Of course there is a level at which high oil prices will affect economic activity but that level is probably two or three times the present price of oil. In the past five years oil has fluctuated between $55 a barrel and $147 a barrel. All major manufacturing businesses, who depend upon energy from oil, and all governments must have by now seen the writing on the wall. Oil will continue to become more expensive. If we ignore the writing on the wall we shall be found wanting.