China Peking Oil and Olympics

PEKING| The imminent crisis that petroleum holds for the global economy has long been the preoccupation of economists around the world and in the west especially.

The bigger picture involves mainly China, India and the United States, where demand for oil is rising very rapidly. In China, the annual growth in demand is over 10 percent, and this has been consistently driving prices up in recent years.

In the short term, it's very difficult to say where prices are heading. This winter might be hard in Central America. The unrest in Nigeria could continue, or a whole host of other problems could disrupt production, and prices might very well go above $100 a barrel.

What will happen in Iran before Bush leaves office? China is on the other side of the table. Oil, water, energy and raw-materials are a complex bundle in the global game for control and power over resources.

Now in particular, with prices of crude oil threatening to breach $100 a barrel, the question marks raised by this troubling trend have become impossible to ignore. Petroleum will maintain its position in the next 30 years. There are no short term alternatives.

However, the trend to produce gas from biofuels will not be limited to sugar, corn and vegetable oils, but will also include the use of many types of organic wastes, forestry residuals and even domestic waste.

Some energy specialists think the prices will go down and settle at around $50-60 a barrel. Prices can't remain at $100 for very long. Others predict that we might hit $150 or even $200 for a barrel of oil.

Pretty soon, the pressure will force greater fuel efficiency in transportation and a decrease in the global growth rate of oil consumption. We are most likely going to see a better balance. But predicting the future is a tricky business. Who knows? But I guess there are quite strong forces that genuinely care about the price of oil.

Higher prices also add to the incentive to drill new sources will increase supply and also bring down prices significantly. Incentives for increased efficiency are a hidden source of energy. We can save up to 20% of our power by simply using it more wisely.

Western countries will seek to limit their dependency on foreign imports, particularly from regimes like the Gulf states, Russia and Venezuela. Just over a year ago, Europe suffered when Russia limited its export of natural gas to the continent over a dispute with Ukraine and Belarus.

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