Saturday, July 11, 2009

What an anniversary

One year ago today, oil prices reached their (so far) historical peak of $147.29 per barrel. We can chalk that up partly to some genuine constraints on the amount of oil that can be pumped out of the ground at any one given time, and partly to rampant speculation (Goldman-Sachs, historically a firm with a hand in inciting speculative bubbles, was really pushing for $200 per barrel oil last spring). Prices are somewhat more sane, although there is still plenty of volatility to be found, again mostly driven by speculation (sometimes by rogue traders) rather than supply and demand. Some of that volatility could probably be mitigated by regulating the futures markets. The rest is probably due to those constraints on what can be pumped out of the ground at any one given time - we could argue about when the phenomenon of peak oil will make itself felt (I'm somewhere in between the pessimists who think we've already reached the peak, and the optimists who seem to think I'll be elderly by the time the peak arrives). Mitigation of the influence of peak oil, however, requires a switch to alternative sources for energy consumption, and unfortunately we're about 3 decades behind the curve when it comes to the research necessary to make those sources viable (a situation that was highly preventable by the way). I think it's worth a reminder that $200 per barrel oil would have had (and could still have) some very profoundly negative consequences.

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