Environmental Engineering Reference
In-Depth Information
It may be tempting to try and equate the recent inlation of oil prices to the
sudden price increases in oil during the 1970s. After all, if the circumstances
are analogous, the world can expect oil prices to fall back to preinlationary
levels as they did between 1985 and 1998. Unfortunately the circumstances
are not analogous. he escalation of oil prices in the 1970s was due to a supply
shock. Speciically, oil-producing nations in the Middle East curtailed supplies.
he current trend of escalating oil prices is caused by demand-side pressure.
he emergence of new economic powerhouses such as China and India, along
with unabated increases in oil consumption in established industrialized
countries, are taxing the ability of oil-producing nations to meet demand.
27
Not only are there concerns that oil capacity expansion eforts will continue
to lag demand growth over the next few decades, there are a growing number
of experts within the oil industry who acknowledge that the global supply
of oil may have peaked.
28
For example, the Japanese government, which is
a major importer of oil, estimates that commercially recoverable reserves of
oil will be exhausted in 40 years.
29
If oil has indeed peaked, it will become
increasingly scarce and more costly to procure as rampant demand continues
to deplete available supplies. It is for these reasons that the IEA anticipates
that the price of oil will remain above US$100 per barrel (in 2008 constant
dollars) for the next three decades (see Figure 1.7).
For over 50 years, major oil-producing countries have been in the driv-
er's seat in terms of controlling the price of oil. he Saudis in particular,
who still boast over one quarter of the world's proven oil reserves, have
played an active role in ensuring stable oil prices by controlling supply
and pressuring other OPEC nations to follow their lead. Leaders in Saudi
Arabia have astutely recognized that high oil prices provide incentives
for nations to consider adopting other energy technologies.
30
he fallout
from the oil crises of the 1970s taught this lesson. In response to high
140
120
100
80
60
40
20
0
2000
2008
2015
2020
2025
2030
Figure 1.7
. IEA Estimates for Oil Prices 2008-2030
Source
: IEA, World Energy Outlook (2010).
