Oil aplenty, but investment needed

THE world is paying dearly for two lost decades in the oil industry – from the mid-1980s until the mid-2000s – when prices hovering around $US20 a barrel discouraged investment.

There is a thick soup of factors contributing to the dizzying rise in oil prices – among them the fall in the US dollar, surging demand from China and the rise of commodities as an asset class – but the most important is the lack of investment.

Oil prices have risen within a whisker of $US120 ($128) a barrel, which is a 20 per cent increase in the past three weeks. It is a 40 per cent increase since the beginning of the year and double the level of a year ago, although $US60 a barrel was seen then as a shocking development. The price being mumbled in the marketplace now is $US200, although no one is saying when. At a gathering of oil and energy ministers from around the world in Rome last weekend, Saudi oil minister Ali Naimi shocked delegates by departing from the long-standing OPEC script, which blamed treacherous Western speculators for spiralling prices and admitted under-investment was the cause.

The world, he said, had abundant oil reserves – sufficient to last 50 years and beyond.

The Australian