CNN posted an article blurb two hours ago. Oil hit $50 a barrel in after-market electronic tradings due to worries about a heating Nigerian conflict.
As I see it, there is no reason for this spiraling of prices out of control. My ex-girlfriend insists vehimently that because of simple economics- supply and demand, combined with the fact that oil is a limited resource- that oil prices will continue to spiral upwards towards nether reaching ceilings. I say she needs to pull her head out of her rear and look at other factors besides textbook case analysises.
First of all, what drives markets? Emotions. Fear is one of the biggest of any emotion; and currently, there is more than enough sources to spawn fear in any investor's heart. The Nigeran conflict, Russian oil giant Yukos' CEO Khodorkovsky in jail with millions in backtaxes, the Chechyan uprising heating up in the Balkins, Indonesia muslim conflicts, the Iraq war with oil-infrastructure targeted insurgent attacks, Venezuelian political instability, and the ubiquitious warring factions in Africa to name only a few of the major reasons. Besides international strife, worries come from the inability to have future "cushioning" to allow excess of forseen demand.
The Chinese economy is one factor that is often held aloft as a culprit. The revving Asiatic markets insatiable demand will ironically lead to oil's pricing downfall: with the demand rocketing and prices following, the price will reach a point where the demand will crest. After this demand-crest, the price will unfortunately rise until it realizes there is no demand anymore, to the effect of the coyote in the Roadrunner cartoons when he inadvertantly sprints off a cliff into thin air. Instantanious drop and an economic depression to boot from the inflated prices earlier. Think internet-tech bubble, only with oil.
In 1978 economists were frenzily predicting oil at $100 a barrel: this lead to massive spree of privately-funded drilling and explorations independent of OPEC which, as history can vouch for, curved of the reaching of any such targeted price.
Indeed, as this 1998 survey , by the Univ. SoCal's Petrolium Engineering Program shows, oil productions will not begin to decline until 2010 at the earliest.
As of right now, the world supplies 82.3 million barrels of oil an per day in an economic quarter, according to the US Energy Information Administration (USEIA). And, according to this same source, the world consumes between 79 and 82 million barrels of oil a day per quarter. Ample padding of millions of barrels, plus refineries and fields are running at around 80% right now: an excise in production by 10% will create 8 million more barrels!
A comprehensive graph of oil prices and world events can be found here
Besides, high oil prices are not all bad! Higher prices allow for an incentive for clean energy supplies and renewable energy resources, which is certainly most benificial in my opinion. But, as it is cheaper to pay Iraqis to pump the sludge out of the ground than implement research towards fission reactors or nation-wide solar grids, we will continue to do so for the time being.
Now that you and I both realize oil fears are unfounded and our civilization will not grind to a halt overnight after the $50 or even $60 per barrel is passed, (althought I sincerely predict oil will be between $35-$40 a barrel by Feb. 2005), what does this mean for those who still belive in this fictious fantisy?
It helps Kerry for sure. Economics will start to stall as oil prices continue to creep, magnifiying the small business woes ontop of already faulty economic practices in place. Oil prices at the pumps have stayed relativly static compared to overall prices: Haliburton and Co. have kept reserves slowly trickeling to prevent 70's shortage lines at the pump and paralleling numbers at the polls. Most voters are only goaded to action once it hits their pocket, and with Big Corporations realizing this, everything will have to stay as static as possible for the next few months in order to allow Bush to have a stable footing for his ennui-voter platform.
So I say bring on high oil prices! Good for Kerry, good for alternative energy R&D, good for self-regulating out of control economies like China who refuse to put on the breaks.
So watch-out for the next few months for the demand crest, and then that "uh-oh" realization as the coyote looks and waves bye-bye right before he plummets, whistling, to poof spread eagle into a dust-cloud silently on the desert floor below.