The Era of Cheap Crude Is Ending

…Oil is a limited resource. Limited in the sense of the amount that is available at any particular price at any particular time. The world is not running out of oil, but it is running out of immediately accessible inexpensive oil. It has become increasingly hard for oil producers to supplement supply by the 1.4 million barrels a day that is needed annually to keep up with demand. The time lag for bringing new production to the market is long, far too long for the discovery of new sources, as in the Brazilian continental shelf finds, to affect current prices.


The United States, the world’s largest consumer of oil is also its third largest producer, behind Saudi Arabia and Russia. America has substantial untapped oil and energy resources, on the outer continental shelf, in natural gas, in nuclear energy and in coal. The United States also has the most technically advanced, environmentally regulated energy sector. By refusing to develop its own resources the US has permitted external producers to determine marginal production. The world’s largest oil consumer is hostage to some of the world’s smallest. Unwilling to increase its own production it should not surprise US consumers that others refuse to do so for their benefit.

Oil is the industrial world’s chief raw material and the entire world’s transport fuel. The world is rapidly industrializing, far faster than at any previous epoch, and the model is, whether environmentalists like it or not, the consumer societies of Western Europe and America. The United States today has 250 million vehicles and 307 million people. China has 37 million vehicles, over 1.3 billion citizens and an economy that has grown faster than any other in history. Little imagination is required to predict that these cars will not be powered by wind turbines, biofuels or hydrogen.

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