Crude oil is the world economy. Every country depends on this “black gold” to satisfy the huge demand for energy humanity possesses. Even a few countries use oil to fund their whole national economies, for better or worse. With a limited number of nations controlling the energy demands of the whole world, the price of oil effects everyone. With the recession of 2008, the price of oil saw a dramatic drop with the drop in business, lowering the costs of electricity and transportation. But today, the price of a barrel of oil has crossed the one-hundred dollar mark. Consumers of oil shouldn’t expect this to change any time soon.
Supply and Demand
The simplest reason the price of oil will remain high for the foreseeable future is the economics of its supply and demand. In short, demand of oil keeps rising every year. In the past century, the supply of oil has kept pace. However, this won’t always be the case. There is a limited supply; only so much of the Earth’s past biomass was converted to oil. But it isn’t just the maximum supply of oil that is the problem. It is the supply of cheap and easily accessible oil. And while predicting the end of this supply has made fools of many analysts in the past, geology says the supply will eventually run out. Now, combine this with an increasing demand, especially in the developing world, and the price of oil will increase.
(Lack of) Alternative Energy
Many different alternative energy sources will be the future of the world’s energy use. They will need to as the world demands cheap, not to mention clean, energy. However, the vast majority of these new technologies are nowhere near efficient or cheap enough to replace oil’s dominance. Every technology needs time and money to develop into a usable product. Look at electric cars, a hopeful technology that will replace or diminish society’s demand for gasoline. Electric cars need more efficient batteries and a nationwide infrastructure if charging stations to replace gasoline-run cars. These technologies will eventually develop, just not in the near-term.
One of the riskiest factors in the price of oil has been the political situation in some of the major oil producing nations. The recent uprisings in the Middle East demonstrate this idea. Overall, except for Libya, the major oil producing nations were unaffected. Even Libya doesn’t supply that much of the United States’ oil demand. But it was the fear of greater uprisings that drove the price of oil upward. Every rumor of protests in Saudi Arabia sent the price of crude oil upward. And who knows what would happen to the price of oil if the U.S. or Israel got in a war with Iran (Hint: it would increase). Until the countries of the major oil producing nations adopt more stable and democratic regimes, the price of oil will always be subject to crisis shocks.
In the medium-term, there are few reasons for the price of oil to decrease. It’s too important to the world economy. However, this says nothing of the long-term or the short-term. In the long-term, it is impossible to predict what will happen. There are too many possibilities to consider; making incorrect long-term predictions is always the risk of the futurist. In the short-term, oil is subject to the daily ups and downs of the oil market. It will have streaks where the price increases and other streaks where the price decreases. But overall, the price of oil should remain high for a good part of the 21st century.