Black Magic - $100 dollar oil is not all bad

[OKIsItJustMe]

http://www.timesonline.co.uk/tol/comment/leading_article/article2917428.ece

From Times Online
November 22, 2007

Black Magic

$100 dollar oil is not all bad

If or, more probably, when the price of a barrel of oil breaks the $100 mark, gloom-mongers will have a field day. Expensive oil stokes up worries about global energy shortages, harms the world economy and send diplomatic relations between producers and consumers into a deep freeze.

The more appropriate reaction is considerably less alarmist. Nerves are jangling in part because the price of black gold appears to have detached itself from reality. In nominal dollar-per-barrel terms it is well into record territory, and well above the long-run-average. But if you adjust for inflation the price is only near to the previous peak, seen in 1980, after the Iranian Revolution.

Although $100 oil is not as costly as it seems, like-for-like price comparisons with 1980 are still troubling. After all, if oil was expensive in 1980, it is similarly expensive now. Today's near-$100 price compares with an inflation adjusted average since 1980 of $42. If the diplomatic implications of high, or volatile, oil prices were a concern in 1980, they should be a worry once more. It is certainly shifting hundreds of billions of dollars, and plenty of economic power, from oil- consuming countries in the West to oil producers in the Middle East and elsewhere.

...

Yet expensive oil has many positive implications. Rising energy consumption is an encouraging indicator of rising living standards. Meanwhile, consumers are encouraged to use oil more sparingly or wisely, which is a plus for the environment. British drivers will not abandon road transport because petrol has breached the £1-a- litre threshold but they will think twice about making a journey and look more carefully at fuel-efficient cars.

The longer that oil stays at or above $100, the greater the incentive to secure alternative, and diversified, sources of energy. In marking up the price of oil, the market is, once again, showing how it can prompt answers to policy conundrums that befuddle governments. The prospects for new technologies, such as hydrogen fuel cells, tidal power and contemporary nuclear plant, have never been brighter.

[sarge43]

1. Run that one by the millions on fixed incomes, the millions working

two jobs just to break even. Factor in the rising prices on all goods and services dependent on road and air transport. By the way, the US doesn't have the nation wide public transport system Britain and Europe has.

Yes, yes the prospects are bright, but prospects don't heat my home.

(typo)