Oil prices could remain permanently high
The BBC reported in April, that oil prices were set to rise in the long term. The healthy American and Asian economies are giving us a taste of what is to come, the Guardian reports today:
...While the current war in Iraq has undoubtedly affected the oil market, the level of petroleum prices is being driven in substantial part by strong economic growth in North America and much of Asia, especially China, which suggests that overall consumption has permanently moved up a gear. That means that unlike the oil shocks of the 1970s and 1980s, there may be no retreat in prices back to the $20-a-barrel level seen as recently as 1998.If that is all, then the world – and especially the heavily industrialised, oil-reliant economies – will have to adjust to a background of long-term higher prices. While petrol use is relatively inelastic, it is still subject to the iron law of economics that higher prices generally mean lower consumption. That will entail a switch back to the fuel conservation policies of the 1970s, as well as having the more positive effect of making alternative, environmentally friendlier energy such as hydrogen and solar power more cost-effective in comparison…
I’d been holding off on ordering heating oil, but if the Guardian is right, I could be waiting a long time.