$100 a Barrel Oil – Revisited
January 4th, 2008
The price of oil topped $100 on January 2 and again on January 3. During these past two days I have received emails and phone calls from regular readers, complimenting me on my correct prediction. As I wrote here more than two months ago, the price of oil would not only cross the $100 price barrier, but would trade in the $80-125 range for the next year.
A year ago, on the syndicated program “First Businessâ€, when oil was trading in the $50-55 range, I predicted that oil would go over $80 during 2007, which, at the time was a contrary view, as oil had been down trending for several weeks at that point.
As a futurist, it is my job to look into the future and try to discern what might happen in the months, years and decades ahead. I look at patterns and large dynamics that translate into macro trends that then translate into specific developments. It is an odd sensation, but whenever any of what I have predicted becomes reality, it feels as though I have already experienced it. When oil crossed the $100 price barrier these past few days, it was as though I had already experienced that. My reaction? Of course it went over $100 a barrel, what’s the big deal?
The long term trend in oil and gas prices is ever upward. I do think that the trading range for oil for the next year at least will be $80-125. There are few if any situations I can see where the price could fall below $80. However there are some situations that could take the price up over $125. The rebel uprising in Nigeria, which was the cause for the breaking of the price barrier, is just an example. What if there was a successful terrorist attack on a major oil pipeline in the Middle East? What if Mexico or Russia, or Canada, all major exporters of oil decided to export less as internal market demands forced them to keep more of the output for their own countries? That is already occurring in Iran.
What might happen if the dollar continues to decline against the Euro? The headquarters of OPEC is in Vienna. What if OPEC made the decision to switch the price of oil to be benchmarked to the Euro? Even if that radical step were not taken, a declining dollar will force the price up, in dollars. Euro economies will not experience an increase in price as the dollar has declined. The truly powerful upward demand pressure on the price comes from China and India whose currencies are less tied to the dollar than the U.S. would like them to be.
As I will discuss in my annual predictions next week, 2008 will be the year when the concept of peak oil will move into the larger awareness of the public. A great number of scientists and energy experts believe, as do I, that the world is now passing through peak oil. When the understanding of this probability sinks in it will trigger some oil producing companies to start to manage sales for the long term. This could well drive up the price as production will be limited as these countries look for long term revenues.
Of course the great news in the rise in the price of oil is that incredible amounts of investment capital are now flowing into the alternative, renewable energy field. Now that people in the U.S. and around the world have accepted the fact that oil will most likely never be cheap again, the rush toward alternative energy will accelerate as there will be a perception that large financial investments can be recouped.
It is gratifying when my predictions about the future prove to be true. It is one of the reasons you read this column. I appreciate your readership and will strive to continue to provide you with clear views into the future. It is my job as a futurist to do so.
January 4th, 2008 at 3:28 pm
David–I saw http://online.wsj.com/article/SB119932015772763671.html?mod=hpp_us_whats_news , remembered your earlier, prescient post on oil prices, and had already gone there to comment when I saw your post today. Didn’t take long for your prediction re: $100 oil to come true, and I agree that $125 may not be the stretch that many think it is.
Here’s hoping we make some significant strides towards “…the substantial replacement on a global level of oil with renewable energy …†in 2008.
Jeff
January 4th, 2008 at 4:43 pm
david, nice job on the prediction. can you manage my stock portfolio? if we all put our money where your mouth was last year, we wouldn’t be complaining about higher gas prices! i’m all ears for your 2008 predictions.
January 5th, 2008 at 1:02 pm
Excellent post, David. Agree 100%, two thumbs up!
The thing that will bring oil prices down is an alternative energy source that competes on a level playing field with crude (i.e. the energy content is as high or higher than crude oil).
For some reason I see this alternative energy source being developed by China or Japan, where industry ties to the government may be a bit more transparent….
-Grant
January 6th, 2008 at 4:08 am
spot shortages, those will be fun….
the best thing that could happen to america, gas at 10 bucks a gallon…
and if you really want to screw over america, give them cheap gas for another two or three years, because the complacency of america is going to throttle them, and that will increase it
(also, i agree with grant, america will be buying their solar and alternative stuff from asia)
January 7th, 2008 at 12:33 pm
Can you predict what would happen if there was a worldwide mass movement to implement free public transit?
http://www.freepublictransit.org
January 7th, 2008 at 9:09 pm
The rub is in the word “free”. As Robert Heinlein wrote in “The Moon is a Harsh Mistress” TANSTAAFL there ain’t no such thing as a free lunch. What does free mean. If it is free for riders, then who pays? I am open to the concept, but then the details come in: is it national or just local? And if it is local, does it stop at the city border or county border?
I am a frequent user of public transit and support it. How would you suggest free transit be funded?
David
January 9th, 2008 at 2:26 am
there already is a world-wide mass movement to implement public transportation, it is how the vast majority of people get around on this planet… when they are not walking
the only thing you add is “free”, but “subsidized” also works
and where there is private transport, from cars to planes, no user is paying the true cost of it, if you add in pollution costs, social costs, and all the unquantifiable stuff…. “subsidized” is working there as well…
and free is not possible in any system, everything has a cost…
January 9th, 2008 at 2:28 am
and off topic, looks like the machine wants mrs.clinton
January 24th, 2008 at 5:50 pm
re: no free lunch:
Dumping carbon dioxide into the air is currently free. Use of U.S. military to fight oil wars, no extra charge to oil-auto lobby. Streets and highways to funnel profit to carbon-auto lobby, no extra charge.
Why not stop penalizing the mostly working-class transit riders, who are mitigating the free ride the carbon auto lobby is getting.
Free transit means the same thing as “free” sidewalks… fund it through general revenues.
August 8th, 2008 at 11:37 pm
[…] readers of this column know that I have long predicted that oil would reach and then exceed the $100 price barrier. In fact, when this barrier was first […]
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