Oil prices have been increasing for weeks and a new record was just set in London and New York as oil prices reached $85 and even $86 per barrel today.
This is due to some tensions occurring between Turkey and Iraq. This is an occasion to get back to an article on oil that was published by the IHT last week.
I will also give some data on the oil industry as I studied it for a paper during my master’s degree at Audencia.
The oil market is like any market driven by the law of supply and demand. So as the demand increases rapidly and as the supply fails to answer to it, the prices rise.
There can be multiple factors for the oil demand to increase. The growing economies of Asian countries is one, the beginning of the winter season in the northern hemisphere is another etc.
And oil supply can decrease because of even more numerous factors. Among those factors one can mention the weather (Hurricane Katrina in 2005), political tensions and terrorism, the lack of refinery capacity…
The increase of oil prices wouldn’t be important if Mankind wasn’t consuming as much as 85 million barrels of oil per day. The global oil demand increases by more than two percent per year. The International Energy Agency estimates than 90 percent of transportation is depending from this fossil fuel.
Last week, I was reading as usual the web version of the International Herald Tribune. I always found it interesting and it is my main news resource for the United States. At that time I saw in my RSS reader an interesting title “Quest for new energy supplies is becoming tougher“.
After reading it entirely, I was quite dubious. I have always been agreeing with the views of the IHT. But there, I was quite puzzled if not totally disagreeing.
Indeed, the author seems quite satisfied with the fact that as global warming occurs, some oil reserves become accessible.
Please, make no mistake. I am not at all against oil or oil companies. I also fully understand that we need oil to run our cars and so on. Moreover, oil companies like Total and BP are interested by renewables and fully understand that the era of oil will be no more quite quickly.
Indeed, the CEOs of these companies believe peak oil should occur between 2015 and 2020. (Peak oil is the point where oil supply will begin to decrease.) Meanwhile, the energy demand is due to continue to increase.
But why should we go further and further and find always more difficult reserves to tap into when energy efficiency of car engines could save millions of barrels per day ? Energy efficiency is an economically and ecologically sound way of using oil and more things should be done in this area.
It is said that there is oil for 45 years left. This figure doesn’t take into account that the demand is increasing, so what should happen as the oil consumption rises ? Logical answer: there will be oil for less than this period.
- IHT article : Quest for new energy supplies is becoming tougher
Further reading :
- AFP : Oil prices scale historic heights in London and New York ;
- BP statistical review (see sidebar)