Have you begun to notice how quickly the price of oil has been rising of late? Here in the U.S., the price of gasoline and diesel has been on a rapid climb for the past four to six weeks.
Do you think it’s a positive sign of pending recovery in the global economy? Not so fast!
An article penned by Time and featured in Yahoo News (Oil Is Plentiful, Demand Weak: Why are Gas prices Going Up?) leads us to the potential root cause- speculation. Yes, OPEC and those gosh darn investment speculators are at it again.
This article points out that demand for oil in the so-called rich countries is at its lowest level since 1981, and interesting enough, U.S. oil inventories (stored surplus) has also reached its highest level since the 1980’s. But alas, 2.6 million barrels of this surplus is being stored in idle floating tankers around the world. In the classic supply and demand equation, supply is inaccessible, so price goes up. And then we have the statistic that financial investors have once again plowed billions into oil futures, betting on the timing of a world recovery.
The overall message is clear. Oil markets are not driven by normal demand and supply forces. We should all take note. We cannot waiver from collective commitments toward alternative energy and sustainability initiatives. The U.S. Energy Information Administration predicts that oil prices will rise to $110 a barrel by 2015. That’s about double of what it is today in the U.S.
The world economy has been fortunate to have a hiatus in cheaper oil during this damaging recession. Unless someone brings those ships ashore, our respite of cheap energy is a past memory.