Good bye cheap oil

Oil prices will just keep on increasing

Good bye cheap oilIt had been a long while I hadn’t blogged on oil prices. This came to me as last week I found two pieces of news showing how oil prices are just going up and up and how they will just keep on increasing in the next months and years.

First and foremost, according to, US drivers are paying in 2013 higher gas prices than in 2012, which were higher than 2011, which themselves were also higher than in 2008, when oil prices reached their all time high of $147 a barrel.

Still to this website, the annual average for 2012 for Brent crude – one of the benchmarks for oil prices – was higher than in that fateful year of 2008.

Indeed, the average Brent price in 2008 was of $96.94, in 2011 the average price was $111.26 and last year it was of $111.63. So far oil prices are at $114.

Please let me remind you that as I was writing my monography on the oil industry for my Master’s degree back to 2005-06, oil prices were around $60… and during the 1990s oil prices were around $10 to $20.

As notes : ” most inhabitants of the globe pay prices reflective of the Brent Crude price, and that’s why it is frequently quoted as the world price. “

The article’s point is that we shouldn’t trust oil companies when they are saying that drilling here, drilling there, drilling everywhere  would ease oil prices.

Indeed any new oil supply will pale in comparison with oil demand. And even if it did in terms of quantity – which they will never do – the exploitation prices would be a huge problem.

To make it plain and simple : all the cheap, easy to-access-oil has long been extracted, refined and burnt. Cf my article on extreme oil – Extreme oil anyone ? – for an explanation on that.

Let’s face it, we have reached the point of no-return, we have reached Peak Oil, and nothing will ever be the same.

If you are doubting what you just read, please read the following.

To a report which was published last week by the much respected OECD (Organisation for Economic Co-operation and Development ), ” Oil prices could rise to anywhere between $150 and $270 a barrel by 2020 as demand growth in emerging markets like India and China out paces expected supply. “

You see ?

The Wall Street Journal’s article have some more insight as it quotes an economist from this prestigious organisation :

“I think people have been calmer about oil prices given the new supply, but if you really look at the implications of rising demand, you see this isn’t true”

“There is a strong price increase needed despite this new oil production coming on stream “

If developing nations want to have as many cars by inhabitants than the Western “developed” world has (or had) it simply won’t be possible. Even if cars using less than 1 liter for a 100 kms are to be invented, there would still be the problems of traffic congestion (cf. my Cleantechies post), air pollution and so on.

Luckily, there are many alternatives to cars and more and more people are seeing them.

Public transportation such as buses, trams or light rail trains are great way to move around cities. Walking an biking are great ways to move around for short distances and are excellent to your health.

This is perhaps why The Atlantic has published a great article to what awaits the car : near total disappearance.

Even if it won’t happen overnight, and perhaps not soon, but it will follow the way of the steamship and the landline…

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