$250 A Barrel Oil By Next Year?

By Cernig

Gazprom's head honcho expects oil to skyrocket in the coming year, rising another $60 -100 dollars a barrel. The price of oil has already more than doubled in the last 12 months. But the Gazprom boss also says OPEC has very liitle to do with price rises.

Alexey Miller, chief executive of Gazprom, said that the global economy is facing "a great surge in oil and gas prices" that will "end with prices at a radically new level."

His comments to the Financial Times came as oil surged to a new high of $141.98, leaving prices more than double where they were 12 months ago and casting a shadow over the prospects for the global economy this year and next.

Mr Miller also dismissed hopes that the Organization of Petroleum Exporting Countries can do much to bring prices down. "Not a single decision has been passed of late that would really influence the global oil market," he said.

Gordon Brown and President George W Bush have both lobbied OPEC, and in particular its biggest producer Saudi Arabia, to ramp up production.

Saudi's decision to increase production has done little to bring oil lower as fears for global supply and the weaker dollar help to drive prices higher.

Mr Miller expects increasing competition for the world's gas and other energy resources to drive oil to $250 a barrel next year.

All of which makes McCain's hodgepodge of corporate giveaways and wishful thinking a lot of "too little too late" - not that Obama's in any better state.

Our tireless researcher, Kat, who sent me that article, also commented on it in her email - and I'm now turning the rest of this post over to her.

$250 a barrel oil by next year?!  Screw the so-called free-market shinola that got us into this mess, and continues to make it worse by the day. If we really don't want to starve during this unfolding economic firestorm, we'd best find a way to force Congress to:

1) immediately start a domestic Marshall Plan to manufacture millions of plug-in hybrids (heavily-subsidized so they'll be cheap-enough for us to actually buy);

2) suck up to Iceland pronto, for their help in getting all that potential geothermal electricity on line pdq; and

3) deliver a resounding whop upside the head to whoever just froze all those solar projects on federal land.

If we can get it through our Congresslizards' thick heads that this is a major economic crisis, and light a bonfire under them to do these 3 things, it might just create enough jobs so that we can not only continue to eat, but also continue paying our mortgages and utility bills.

For starters, we need to convince our Congressmen of a few stark economic and stragegic realities:

1) all the world's deep-sea oil-drilling equipment is already in use, and won't be available for several years, so they can forget that option,

2) by the time they get even one new nuclear power plant built, both the country as a whole and 99% of the populace will already be decimated economically, and

3) the US can't afford to continue spending $15b a month for the Iraq occupation, can't afford for our military to continue consuming 8% of the world's yearly oil supply as fuel in the process, nor can we afford to wait for years as our military vainly tries to impose enough stability in Iraq for Big Oil to develop Iraq's vast oil reserves, especially since, by the time that happens, we won't be able to afford the $250+ per barrel they'll still be asking for it.

Indeed. If oil rises to that kind of price and stays there, as the gazprom boss suggests, then "recession" will be too polite a term for it. Every single Western economy is behind the curve on this one, but America is further behind than most. It also has most capacity to catch up, should the political class get off its collective duff.

Comments

[Emocrat]

Here we have yet another interested party further bidding up the price of oil. Goldman Sachs does it (and they deal in oil futures contracts), OPEC does it. Everyone who stands to gain from extortion-level pricing is publicly bidding it into the stratosphere. I can't imagine why.

So while congress is whinging endlessly about "speculators," other market forces are having an even greater impact. It would be nice if we did the things noted in this post (all great and necessary ideas). But we actually need to go a lot further than that to have a lasting impact.

I live in southern Kahlifohnia, where we have sunshine all but maybe 30 days of the year. It's also built up to the point one must drive for at least 90 minutes to get someplace relatively not-developed. A see of roofs, yet no solar panels on them. Instead, we are told we have to build a new coal-fired plant in Mexico. Discussion ends about there, because most people don't want that either.

But there's also the issue of food itself.

We import food from across the country and around the world. How is that sustainable with $200 oil, much less $250? If we don't relocalize food production, some places will literally starve. We also HAVE to go organic now, as fertilizers have already doubled in price just in the last 9 months or so and that will continue ad infinitum.

$250 oil makes for a nice, tidy headline, but all the economic stuff I've seen of late suggests a Depression is likely to be well under way by the time the price gets that high. There's nothing like dust bowls and mass dislocation to aid in demand destruction, is there?

There must be some kind of powerful hallucinogen in the DC water supply. I can no longer fathom, much less rationalize, how these people manage to justify their existence in congress anymore. No idea is seemingly worth pursuing if it doesn't fit into some neo-liberal tax cut scheme, or perhaps some fat subsidies for corporations that shovel money their way.

Ethanol now consumes 40% of our dwindling corn crop. I say dwindling because even though more is being planted, the weather has done a nice job of cutting yields. Still, ethanol has turned into one helluva cruel boondoggle, hasn't it? But you'd never know it by listening to congress, as they seem to be quite high on the fumes.

I don't think I've ever been more morbid about this country's future than I am right now. I hope this affliction is curable!

[Klaus]

The biggest limitation of wind and solar is intermittency, read all about it. It would take some hitech wizardry to push the wind/solar share of total energy consumption (as opposed to production) above 10%. So battery technologies have to be developed as well, and then you don't know how long that will take (lithium shortages would also have to be taken into account). So nuclear it is.

[Enlightened Layperson]

Looking on the bright side, this is probably the most effective way to reduce greenhouse emissions.