The Oil Price

Climate change is influenced strongly by the amount of greenhouse gases in the atmosphere. Especially, the concentration of CO2 has increased over the last decades. This increase is mainly caused by the extensive use of fossil resources, such as oil and gas. The way the energy supply is currently arranged, on the one hand causes higher concentrations of green house gases, and because of this higher temperatures on earth, on the other hand our energy system is fully based on the use of fossil sources.

Depletion of the main reserves, additional to the demand explosion from countries as China and India, leads to uncertainty and, more importantly, a fast increasing price of energy. Figure 6.1 presents the historical development of the price of crude oil. A peak is visible following the two 1970s' oil crises, but the recent climb is surpassing that one.

Figure 6.2 gives a more detailed image of the previous years. In 2005 oil prices were on a level of $ 50-60 per barrel and in 2007 experts debated whether the $ 100 barrier would ever be reached (Fig. 6.2). This graph does not show the devastating course after 2007. The steep increase continued and in May 2008 the price of crude oil peaked at $ 135. Due to the financial crisis that followed after the summer of that year prices dropped again, but experts expect a renewed climb to new heights within a year.

2This will be discussed further on.

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Fig. 6.1 The price of crude oil during the last 50 years (www.wtrg.com)
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Fig. 6.2 The price of crude oil between 2004 and 2007 (www.wtrg.com)

These developments urge for answers. Development of a sustainable energy system is essential and becomes more urgent in the near future.

In their article, Williams and Alhaji (2003) argue that current times show strong similarities with the periods just before the energy crises in 1973 and 1979. Common elements include:

• Declining US petroleum production

• Limited US policy options for Middle East

• Low level of oil industry spending

• High dependency on oil imports

• High import from a small number of suppliers

• Political turmoil in oil-producing countries

• Speculation

• Economic downturn

These elements can be seen in international developments of today. The rapid rise of oil prices makes it even resembles a crisis more (Fig. 6.3). In day-to-day practice these developments are underestimated and put aside as a future problem. Aims and goals of European, national and regional policies are moving in the right direction. The question is whether the objectives are ambitious enough or not and if they will be achieved in time.

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Fig. 6.3 Oil production and price since 1973 (www.wtrg.com)

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