Wednesday, May 28, 2008

Why High?

Oil prices are sure all over the media.

This is the best explanation for why oil prices are skyrocketing. It's very technical, but it's all there. Here is the conclusion:

We are now in the early stages of a full blown energy crisis that was predictable if not wholly avoidable. Politicians are awaking to the crisis now that escalating energy costs make its existence plain to see. It is highly unlikely that politicians will now grasp the gravity of the situation that the OECD and rest of the world faces and the responses will likely be ineffectual and too little too late.

The principal reason for current high oil price is the proximity of a peak in global oil production. Politicians must understand this and then grasp that natural gas and coal supplies will follow oil down by mid century. Reducing taxes on energy consumption right now is the wrong thing to do. Taxation structure needs to be adjusted to oblige energy producing companies to re-invest wind fall profits in alternative energy sources on a truly massive scale.

Energy efficiency should be the guiding beacon of all policy decisions and this must apply equally to energy production and energy consumption.

I completely agree. Well, not completely. I think the fundamentals on oil are going to dictate continuing higher prices until alternative energies reduce demand.


Nothing goes straight up (weekly oil prices):

And that's what oil is doing right now. A portion of the recent run-up is speculation imo. This mini-bubble will eventually burst and oil will come "down". I put that in quotes because I don't think we'll ever see sub-$3.00 per gallon gasoline again. What we will see is continuing higher highs, and higher lows in prices until everyone gets it through their thick skulls (it's taken over 30 years so far) that cheap oil is over.

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