Business | Opinion
End of oil is inevitable but don't worry just as yet
Well, it isn't $100 per barrel of oil that is the imaginably far-off price ceiling imagined by analysts and industry insiders.
- By Leah Bower, Special to Gulf News
- Published: 00:06 May 27, 2008
Well, it isn't $100 per barrel of oil that is the imaginably far-off price ceiling imagined by analysts and industry insiders.
Now people are blithely tossing out the possibility of $200 per barrel crude.
An analyst with Goldman Sachs told Bloomberg that oil could hit the $150 to $200 mark within the next two years, and the bank is now saying that $140 may be a realistic price as soon as the second half of 2008.
Heck, the price was already headed for $133 a barrel in early trading on Monday.
With the summer travel season just kicking off in the United States, the US dollar's steady decline and Saudi Arabia grudgingly agreeing to produce a meagre 300,000 barrels a day even as the Organisation of Petroleum Exporting Countries (Opec) continue to collectively twiddle their thumbs, we seem to have a perfect price storm in the making.
And as nice as it is that the United Arab Emirate's Energy Minister Mohammad Bin Dha'en Al Hamili said "We are always happy to put more oil in the market if the market needs more", I can't say I see that having a significant impact, considering the combination of factors driving prices, especially the prevalent concern that there just isn't enough of the black, viscous stuff to go around.
The perception that world supplies won't be enough to meet demand has been growing. It has culminated with the International Energy Agency (IEA) ordering an inquiry into whether we could run dry in as little as four years' time.
While I agree with the IEA that Saudi Arabian estimates of black gold beneath their sands stand a good chance of being wildly inflated, I have a hard time believing that we could lose power by 2012.
I don't know anyone who truly thinks the Saudis are being correct about how much their reserves really contain. And truly, I can't see how it would be a smart political move on their part to do so.
But my personal favourites are the people who devote untold hours towards deciphering Saudi Arabia's remaining reserves from satellite photographs.
Nothing I have read there, or elsewhere really, indicates Saudi Arabia's numbers are anything other than somewhat mythical. Heck, I remember reading a New York Times story in 2005 that set some of their predictions on their ear.
Middle ground
Instead, however, I favour the middle ground. We may be approaching peak oil, but probably not tomorrow.
But the IEA study does illustrate what is going through many people's minds these days - someday we will run out of oil.
I guess we'll all be waiting with bated breath to read the IEA's forecasts, due out in July and November. Until then, we can keep focusing on alternative energy sources.
Already I have a number of friends who've made a pretty penny investing in everything from wind power to those biomass reactors I mentioned last week.
But that isn't going to alleviate any of the pain we feel at the pump, or at the grocery store.
Sadly, I don't see much any of us can do to pull investors away from commodities as the dollar continues its rather alarming long-term slide into oblivion.
Nor do I think we are going to find reserves under the northern ice cap or by opening the Arctic National Wildlife Reserve to drilling.
Sure, we can drill for oil that we couldn't imagine reaching 10 years ago. But the methods are still expensive and there is always going to be a limit to how much we can find.
No, it isn't a pretty picture. But on the upside, it probably isn't as bleak as current prices would indicate.
The writer is a freelance journalist based in Alaska, USA.
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