Wednesday, April 30, 2008

Analyst: $7 Gas by 2012

The global oil situation is pretty bleak, reports the NY Times. Oil demand is going up, of course, because Americans need bigger SUVs and China, India and the Middle East are sprinting to catch up with us.

As demand goes up, so do prices. That’s normal.

But according to the International Energy Agency chief economist, what's not normal is that, as prices have been rising recently, demand has not been ebbing and oil production has not been going up. That's why prices keep rising and rising.

How high will they go? CIBC World Markets analyst Jeff Rubin told The Times, oil may hit $200 a barrel in 2012 pushing the price-per-gallon of gas to $7 in the US.

Two problems. Supply and demand. Regarding demand, Pound360 believes developing nations are scurrying aboard the oil train to a higher quality of life because it's the fastest, simplest, easiest way to do it. They should expect big brother (the developed nation that's benefited the most from a century of oil) to innovate and come up with a clean, renewable energy source to take us all into the next act. But we (the US) aren't into that. Of course, we expect prices will come down (like they always have), so why innovate? But that's a fading possibility.

According to the NY Times piece, we're simply running out of oil reserves in many places (Alaska, Britain and Norway, for example), while political instability and market wrangling is stalling production in others (Iran, Iraq and Russia, for example).

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I started pound360 to channel my obsession with vitamins, running and the five senses. Eventually, I got bored focusing on all that stuff, so I came back from a one month hiatus in May of 2007 (one year after launching Pound360) and broadened my mumblings here to include all science.