Why oil prices keep rising

The problem is two-fold. Supply is not rising as prices increase because there is no excess supply. But more importantly, demand across the world is increasing fast.

In the next 17 years, plans are to move 300 million Chinese from farms to cities that have yet to be built. They will want roads, cars, buildings and streetlights. The equivalent of five New Yorks, and some 50,000 skyscrapers, are on drawing boards. Already, some 174 subway systems are under construction and a power plant is completed every month. China already has 200 cities bigger than Dallas.

China is hardly the only emerging country to be modernizing fast, just the biggest. The US (and the world) needs the equivalent of a Marshall Plan for clean energy and transportation, with any promising new technologies being shared by all. Let’s take a tip from the open source movement, and apply those principles to cleantech. Anyone can use the technologies for free with the proviso that whatever enhancements they develop are then fed back into the system for the use and benefit of all.

George Soros says the price rise is fueled by speculation, that it is indeed a bubble, but it won’t burst until the US and Britain are in recession and demand drops. Other investors and speculators say we could see $200 a barrel oil. And they could all be correct, we could see a huge price acceleration, then a crash.

  • DJ

    There’s no consensus that there actually IS a bubble. However, the most optimistic projections I’ve read suggest that when the “bubble” bursts, oil will fall no lower than $100 per barrel, so don’t bet on cheap gasoline anytime soon.

  • Jim

    “prices increase because there is no excess supply”

    Which has been an engineered shortage:

    1) by Western governments (whose societies require huge energy resources) blocking exploration and refining capaciities out of self-deceptive NIMBYism

    2) by under-developed nations subsidizing petroleum consumption in order to promote development

    Presumably, increased petroleum prices will eventually throttle both of these impetuses.

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