Future of the oil price

ZhiChu Huang
EAP2
Summary Response
July 3, 2008

Future of the oil price

In “Oil: A global crisis” (2008), by John Murray, it explains some reasons for the rapid increase in oil price and what will happen in the future. First, the oil price has increased because of the Iraq war. The oil expert explains that the oil price will be cheaper than now without the Iraq war, and the oil price has risen faster in the period after war. An expert said there would be the highest price of oil next year. The expert said Iraq is a big oil producing area, so its oil supply can have a great effect on the oil price. Now, eight countries have already been at a peak of oil production and two countries are also close to the top. The expert said the US invaded Iraq to get oil instead of the suggestion of developing oil fields in America. An editor said this was an important reason that can affect the oil market. Then, the expert indicated that the oil production would not rise, even if there is a higher requirement all around the world in the future. So, the expert gave three ways to predict the future of the oil price. First is that the price will be low, by cutting some small areas’ oil provision or making Iraq become peaceful, but this seemed totally unrealistic. Second is that the oil price will keep steady, and it may be not come true soon. Third is that the oil price will rise quickly, because of the oil production countries’ limit on export, and this is well expected to happen.

From the article, first it is clear to see that the most important reason that affects the oil price’s rapid increase is the war, especially the Iraq war. The armies need much oil for military equipments to work when the war begins. Much oil, as an important and necessary fuel is provided for a wasteful attack instead of for useful development. In the other hand, much oil production equipments will be destroyed during the war; maybe it can waste much oil because of the leak caused by pipelines’ being broken. So, wars cause the affection of the normal use of the oil. Many areas lack the oil to develop, even to maintain the essential lives. In my opinion, stopping war is the best way to steady the oil price.

Second, I think the quick increase in oil prices follows the high-speed development of modern industry. With the high-speed and enormous technological develop in many industrial areas, many new types of equipment are invented to satisfy people’s growing demands. That means too much oil will be used for this new equipments’ normal operation and more and more oil will be produced in the future. In addition, every country also needs much oil with the high-speed development of the modern society. Maybe many factories just work 6 hours per day, but they will work 8-10 hours per day to produce as much as possible to satisfy people’s high demands right now. So, not only different countries but also different companies all want to get as much as possible oil to make sure they can get the greatest benefits, so oil becomes more and more necessary and more and more an exigency daily, and then this causes the oil competition among different countries or companies become intense and tense. With this reason, the oil price averages up to a very high level that makes it outdistance its own value.

The last, but I think the most important, is the oil, as one of the most important fuels on the earth, is a non-renewable resource. That means we cannot produce oil, and once we run out of oil, we will never use it any more. Now the reserves of oil have progressively decreased, so the oil price becomes more and more expensive. But I think the expensive price also cannot decrease the use of oil. Even though many scientists have begun to research new energies to use instead of oil, such as solar energy and nuclear energy, their energy and use cannot get the same level as those of oil. So I think oil will be used as much as possible in the future as same as its price. Now, nothing can replace it in the short term; maybe until oil is gone we also cannot find a better resource. So in order to limit the oil use, I think it is the main reason of the quick rise of the oil price.

In conclusion, in my opinion the wars’ consumption and destruction, the competition among counties or companies, the oil reserve’s decrease are three main reasons that cause the high oil price and still rise fast now. Oil as an ancient energy used by us for a long time; we cannot give up using it in a short time. So I think avoiding the wars, reducing the luxurious demand and developing new energy will be the new ways to reduce the high oil price.

Reference
Murray, J. (2008, May). Oil: A global crisis. Independent.co.uk. Retrieved July 3, 2008, from http://www.independent.co.uk/environment/green-living/oil-a-global-crisis-834023.html