Well, don’t say I didn’t warn you. Yesterday oil touches the $100 barrier and its front page news across the world. The primary question remains: Will it last? A long-term perspective demands that the world’s leading economies reduce their dependence on fossil fuels. However, the short-term imperative is still to find more of the stuff. Nevertheless, the main four influencers are: today’s demand, tomorrow’s demand, today’s supply and tomorrow’s supply.
It’s tough to make big changes in today’s demand; people would have to change their behaviour overnight to use less jet fuel gasoline, fuel oil, chemicals, plastics, etc. Tomorrow’s demand, on the other hand, is more malleable. E.g. creation of a new international agreement on climate change including both developed and developing nations, the new fuel standards in the United States, the shift to non-oil-based energy in Europe and Chinese efforts at conservation. In the meantime, however, the global economy is growing at about 4 percent per year - and demand for oil is likely to expand at least as quickly.
On the other side of the equation, today’s supply is already changing rapidly. Just this week, Iraq’s oil ministry predicted that its output this year would, at last, be higher than before the war. In addition, new oil supplies - even from high-cost sources - are coming online in big countries from Canada to Kazakhstan, and in small countries from Equatorial Guinea to East Timor. Supply tomorrow is a tougher nut to crack; so many geopolitical factors can affect it, to say nothing of the amount of oil actually left in the ground. But with peace, and with real changes in behaviour, oil need not see $100 again for a long time. Without them, we’ll keep checking off these landmarks: $110, $120, $130..
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