Why are oil prices rising?
Oil is now nearly $140 a barrel. The price of oil (and petrol) is not rising because someone has just discovered a global shortage, but because of a marked increase in speculation on the futures markets in the USA. Theses markets are the means through which people can try and make money by speculating upon the cost of something in the future. This kind of speculation highlights to us the way our very lives are increasingly dependent upon the idol speculation of (comparatively) a few wealthy individuals.
According to one commentator this morning on Morning Report, Martin Quinlan Petroleum Economist, The Doctors and Dentists funds are driving these high prices (these pension funds are looking for something racy). The high volume of money being driven into the market creates a situation in which the price continues to rise.
The bubble, he believes, would burst if Saudi Arabia produced more oil and created a glut of oil on the market – but why would they do this when there is so much wealth to be gained by them if the price continues to rise, and a limited amount of oil in the ground?
And it’s that ‘limited supply’ that is behind at least some of the reason for the price rises. As traders look forward, the message of peak oil has begun to strike home.
‘I have been believing the world is at or near its peak production, and it now appears to me that traders are taking this as the true condition of future oil supply.’ – Charles Perry, Perry Management.
So, we are in a situation where forward looking predictions of oil production are indicating we may not be able to meet future predictions of demand. When traders are reassured that either oil production of the future will be greater than they presently think it will be, or that demand in the future will be less, then prices may become more stable.
There’s the catch.
It’s highly unlikely that they are going to believe production of the future will do any more than decline. The message of peak oil does seem to have struck home, after years of ignorance. There isn’t much absolute clarity about when peak production will be (or has been) reached, but there is an increasing awareness that it’s a reality we need to engage.
That leaves one other option, doesn’t it. If major Governments spent more time and energy transitioning their nations to non carbon dependent economies, or at least indicating through policy mechanisms and indicators that their nations were transitioning to this economic dependence upon oil and associated products, traders might feel reassured.
And as a result, we would all feel reassured as well.
That’s the trouble with global markets, I guess. It’s a similar story with dairy (climate change is likely to negatively affect dairy production, thus present market prices will reflect the increasingly non-viable nature of our dependence upon dairy).
I’m not a big “what would Jesus do” person. But (recognizing the latitude I’m taking with the text) I can’t help feel it’s time to follow Christ overturn the traders tables and engage in resistance to state and empire. But what might be the most profound and creative way of doing this?
Lastly, for now, it seems to me the constant breakdown of the cost of petrol at the pump, indicating oil companies make a small amount, masks the reality that oil companies are making record profits from oil price rises.
Oil companies are now seem to have an unprecedented and unfettered freedom of being able to put up the cost of petrol at the pump unchallenged (which, if you believe the PR rhetoric, doesn’t make them any real money and is done as a service to us), and make vastly increased profits (through oil going up and the market speculation of those who run the corporations, and their subsequent increased market capitalisation). But is this freedom justifiable? Is it ethical? And is it really freedom at all?
On the upside – speculators aside – prices jumping at the pumps does seem to get us back into public transport, and that’s a great move to reduce carbon dependency. All we need now are electric trams back in Wellington…now where’s that petition?
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