Future of Oil
Every now and then we hear that the era of cheap oil is over. But what is the definition of "cheap" and when is it "over"? I don't have the answers to these questions, but in the last year I can see that there are many more cyclists on the roads and it probably isn't just because there's new bike lanes opening. If oil keeps going up, change will happen... quickly.
Oil is in the mid $60 range as I write - what will it be like when/if it hits $100? Putting aside the important environmental arguments for a moment, where is the tipping point?
In September 2005, CIBC World Markets said it expects to see $100 a barrel of oil "sooner rather than later." It predicts that oil prices will average $93 a barrel in 2007, and hit $100 a barrel by the end of the year. Can we sustain that?
Globalization was made possible by cheap oil. For example, between 1960 and 1973 world exports as a share of world GDP increased by 50%. Oil, the report says, was $14 per barrel in today's prices.
In another report called "Soaring Oil Prices Will Make The World Rounder", in October 2005, CIBC World Markets speculates on what will happen as we hit the $100-a-barrel-of-oil mark.
"Not only will the rise in energy prices act as a brake on world trade growth, but it should re-channel trade along regional as opposed to global lines. In a world of $100 per barrel crude prices, distance costs money..."