Today the price of oil hit yet another new high: $53.70. And while I keep hearing that high oil prices are just an artifact of jitters over Iraq and that “fundamentals” suggest the price should be more like $35 or $40, I’m having an increasingly hard time buying this. Oil prices have been rising steadily for three consecutive years now, oil production capacity is barely increasing, and global supply is now a microscopic 1% above global demand.
So what happens when global supply is 1% below global demand, which will probably happen sometime in late 2005 ? or sooner if OPEC decides to start playing games or riots break out in Venezuela? That chart will stop increasing smoothly and will suddenly spike upward, that’s what. And we’ll look back fondly on the days of $50 oil.
There’s no way we can do without oil. But it’s too bad we’ve had an administration for the past four years that treats with contempt the idea that we should figure out ways to use less. Maybe the next one can do better.