The price of oil plummeted once before and it can do so again — if we play our cards right.
Do you think $140 a barrel is insane? Last week the president of OPEC Chakib Khelil predicted $170 a barrel by summer’s end. More sobering, this week the U.S. Energy Information Administration forecast world energy use to grow fifty percent by 2030.
If that pans out, it would mean the world will need to burn more than 120 million barrels of oil that day. We have it, but can we afford it? Nope, and that is why the oil domain is crumbling.
Hundred of thousands of hybrid cars are being disgorged from Japan to Europe, deeply cutting gasoline use. Those who dismissed solar energy a decade ago as esoteric now embrace it. Fly over entire countries like Israel and Cyprus and much of southern Europe, all with plenty of sun but no oil, and watch millions of solar panel reflectors stare back at you.
And that big bad wolf of energy, nuclear, will come back. It has already saved Europe’s economies from successive ravages of oil. Massively adopted forty years ago as the energy solution by France, the world’s fifth ranking economy, nuclear today produces seventy percent of that country’s electricity and huge exports to Europe.
There will be a monopoly for oil until we invent something else that can move the car engine. But even General Motors is hard at work on an alternative engine because at $5 a gallon money talks.
Efforts redoubled elsewhere into coal and wind, with these giant wind energy columns now peppering landscapes across Europe and even in oily Texas.
As it happened before, alternatives will crack this energy gig. Right now the world of oil is split among new provinces like America, Canada, and the North Sea — which have given much of what they have — and old provinces like OPEC, Saudi Arabia, and Venezuela, where the rest of the stuff lies.
This is where the rubber is hitting the asphalt and producing mind-boggling prices. As we run out of the “secure” province supplies located under Western control, we are falling to oil controlled by potentates and failed regimes.
The North Sea oil, for example, was discovered in the 1960s between the UK and Norway. Oil companies under international contracts flung that territorial sea wide open, taking it all the way up to a peak of six million barrels a day in 1999 from virtually zero in 1970. They worked under universal rules of law. These are not the rules by which Saudi Arabia and OPEC play.
The same oil companies working in Saudi Arabia discovered all that oil in the 1930s and 1940s and set up production until nationalized and kicked out as partners in the 1970s. They now work there only as hired hands. As a result potential production of millions of barrels is locked down. The same goes for OPEC.
Youssef M. Ibrahim, a freelance writer and risk consultant, is a former New York Times Mideast correspondent and Energy Editor of the Wall Street Journal. He can be reached at [email protected]