Raise the Hammer
Reuters reported yesterday that oil futures hit $93.80 per barrel before settling at $93.53.
The spike was due to severe weather in the Gulf of Mexico forcing Pemex, Mexico's state-owned oil company, to shut down a fifth of its production.
We're rapidly approaching the point when the real (inflation adjusted) price of oil reaches an all time peak, higher even than oil prices at the height of the 1979 OPEC crisis.
So far, gasoline companies have been swallowing higher oil prices instead of passing them to customers in higher gas prices, but this can't continue indefinitely. According to CNN, many analysts expect oil prices will reach $100 per barrel by the end of the year, and gas prices will follow suit.
In fact, the remaining disagreement among energy analysts these days is when oil will pass $100 per barrel.
The problem is that after three years of flat supply amid rising demand, there's no spare capacity left in the system. As a result, every event that disrupts any oil supply send shock waves through markets and causes prices to spike.
In years previous, markets could absorb localized supply disruptions by diverting excess capacity from other regions. Today, as Daniel Yergin, the chairman of Cambridge Energy Associates, argues, the market "may be only one or two events away from" $100 per barrel oil.
This is consistent with the peak oil hypothesis, which also finds confirmation in oil production metrics for the past several years showing a peak in production in 2006.
By jason (registered) | Posted October 31, 2007 at 13:58:13
too bad there is no accountability for all the politicians, industry 'experts' and media honks who have spent the past decades deriding anyone brave enough to discuss peak oil or $100 oil. They've always dismissed such predictions as fearmongering by crazy maniacs looking to diss the system. oops. "And now for more on Britney Spears...."
By Frank (registered) | Posted October 31, 2007 at 14:38:28
I guess my "fear" about peak oil is the lack of a feasible alternative to automobile transportation. It's dangerous to ride a bike right now and the buses don't travel past my work... Time to get heads out of..errr...the sand and get some really viable sustainable transportation alternatives in our city.
By jason (registered) | Posted October 31, 2007 at 16:49:19
$5.00 to go:
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