Oil Prices Find a Sweet Spot for World Economy
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Oil prices have done something remarkable over the last half-year or so: they have barely budged.
Memories are still fresh of the chaotic climb to $147 a barrel only two summers ago, accompanied by gasoline costing $4.11 a gallon. The spike led to accusations from drivers and politicians that oil companies were price-gouging.
Oil prices have done something remarkable over the last half-year or so: they have barely budged.
Memories are still fresh of the chaotic climb to $147 a barrel only two summers ago, accompanied by gasoline costing $4.11 a gallon. The spike led to accusations from drivers and politicians that oil companies were price-gouging.
Oil prices have done something remarkable over the last half-year or so: they have barely budged.
Memories are still fresh of the chaotic climb to $147 a barrel only two summers ago, accompanied by gasoline costing $4.11 a gallon. The spike led to accusations from drivers and politicians that oil companies were price-gouging.
Then crude prices plummeted along with the economy, to around $34 a barrel just over a year ago,
only to double again in a matter of months as confidence began to recover. [br]
And there the price has stayed, more or less, since August, reaching a rough stability in the $70 to $83 range.
According to the New York Times, economists and government officials say that if prices remain in that band,
it could benefit the world economy, the future security of energy supplies and even the environment.
The price is high enough to drive investment in future oil production and in supplies of alternative energy, they note, but low enough that consumers can bear it…
Energy experts say that several far-flung global developments have converged to put supply and demand in relative equilibrium, at least for the time being.
Members of the Organization of the Petroleum Exporting Countries have remained fairly disciplined in complying with their announced production cuts.
Meanwhile, among non-OPEC producers, growing oil output in Brazil, Russia and the Gulf of Mexico
has counterbalanced production declines in the North Sea, Alaska, Venezuela and Mexico.
On the demand side, growing appetites for oil in China, India and other developing nations have been offset
by declining demand in the United States and Europe, because of their slowing economies, conservation efforts and growing use of biofuels…
The biggest long-term threat to the new balance is growing consumption in China, India and other developing countries.
But some analysts express hope that such countries can curb their oil demand growth as they build power transmission lines that will enable them to replace inefficient diesel generators with alternative power sources like gas and nuclear.
Stable, relatively high prices also may encourage conservation.
Energy experts note that American drivers still have an incentive to buy efficient vehicles with gasoline prices at $2.80 a gallon,
while high oil and low natural gas prices are encouraging use of compressed natural gas vehicles and biofuels in many countries.
“The price range we are in is positive for encouraging diversity of supply,” said David Goldwyn, a State Department energy official.
“It’s high enough so that countries that subsidize the price of oil still have a high incentive to reduce those subsidies,
and it’s high enough to support energy-efficiency measures that are positive for mitigating climate change.”
