The Real World: Oil at $100

Is $100 oil a cause to celebrate? The answer is, yes — in the short term, and no — in the long term. The answer also depends on who you are and where you sit.

Many oil exporting Middle Eastern government officials may think that the oil bonanza is here to stay. However, oil revenue is notoriously cyclical, with ups and downs wreaking havoc in the national budgetary process.


Petrodollars — or petro-euros these days — also have a nasty habit of causing a national addiction, crowding out non-oil sectors and making countries, business, and individuals dependent on one commodity only. This is hardly a prescription for a healthy economic model.

Yet, oil companies’ owners, executives, and shareholders may be opening bottles of champagne, despite the end of the New Year’s celebrations. But the business people, who run their agricultural, transportation, tourism, and airlines, are threatened with the rising production costs caused by high fuel prices.

Commuters are unhappy as an ever greater share of their incomes is allocated to transportation. Tenants and homeowners pay ever higher heating bills as energy costs correlate to oil prices.

And these are high: The year opened with $100 for a barrel of light sweet crude at the New York Mercantile Exchange, and there is no end in sight. And the rest of the economic omens are dire.

FrontPage Magazine