It’s a Myth That the World’s Oil Is Running Out
From the April 27, 2008 Sunday Times (London)
by Irwin Stelzer
There are more misunderstandings about the oil market than perhaps any other. In America, drivers are fuming and politicians are demanding explanations because petrol has hit about $3.50 a gallon.
That’s 47p a litre, less than half the 105p-115p being paid by British motorists. So “high” in Cambridge, Massachusetts, and Oxford, Mississippi, is “low” in similarly named cities in Britain.
But assume that prices are “high”, which indeed they are by historic standards.
We are mistaken when we think these “high” prices are causing inflation.
High oil prices can force consumers to spend more on petrol and heating oil, at the expense of other purchases.
Ask any suffering restaurateur or clothes retailer if you doubt that.
But high oil prices can’t trigger a rise in the general price level – inflation – unless someone pumps money into the economy so that, to use an oldie but goodie from the economists’ lexicon, there is more money chasing the same amount of goods.
If you want something to blame for inflation, don’t look at oil prices, look at the billions the Federal Reserve’s monetary policy gurus and their confederates at the US Treasury are pouring into the economic system.
Another myth: we are running out of oil.
According to WorldPublic Opinion.org, “majorities in 15 of the 16 nations surveyed around the world think that oil is running out . . . only 22% on average believe that ‘enough oil will be found so that it can remain a primary source of energy for the foreseeable future’ ”.
Those majorities who think we are running out of oil include 85% of the British and 76% of the American citizens polled.
Luckily, they are wrong.
Production of oil is being constrained by several forces, none of them due to God’s failure to put enough of the black gold under our feet.
Several countries that are important sources of supply are in political turmoil, and unable to bring to market the oil they are capable of producing.
Think Nigeria, where security problems have shut down about 20% of the nation’s capacity of 2.5m barrels a day and discouraged new investment, and Iraq, where political paralysis and terrorists have kept production at less than half its potential.
Read more here.
