Oil price

Description:

The oil price has been steadily increasing and has recently peaked close to 150 US$/barrel. The price rose to a record $1.4727 on July 11, 2008.[1]

The rate at which oil is demanded exceeds the rate at which oil is supplied is the driving force of this event. In 2005, for each barrel of oil discovered we consumed six and a half.[2]

This is mainly due to a high dependence on oil, world oil depletion and a steady increase of world oil consumption.

Enablers:

- Global economic growth

- Huge increase of oil consumption in Brics (Brazil, Russia, India, China)

- Heavy Oil dependence

- Source of oil is running out

- Failure of international agreement to reduce oil consumption

- Politics in Middle east

Inhibitors:

- Massive new oil discoveries leading to more oil production

- Development of a new or alternate source of energy

- Energy consumption regulation

- CAFE standards

- Increase in efficiencies

- Lower energy consumption lifestyle changes

- Reduction of oil consumption through environmental awareness

- Carbon tax

Paradigms:

• Oil supply is very inelastic. Higher prices do not significantly increase oil production.
• Oil demand is very inelastic. Higher prices do not significantly reduce the demand for oil.

Experts:

• M. King Hubbert
• Kenneth S. Deffeyes
• T. Boone Pickens
• Colin Campbell

Timing:

• 1965, Oil discovery rate peaked
• 1973, Oil shock. The fourth Middle-East Wars acted as trigger.
• 1991, Gulf war.
• 2003, Iraq war.
• 2007, Peak oil. World oil production peaked.
• 2008, The oil price has been increasing, and nowadays it records highest, over 150 US$/barrel.

Web Resources:

• DOE: Energy Information Administration (EIA)
• EPA: Oil Spills