Beware of another oil shock

After hitting a low of around $32 last December, the price of a barrel of oil has risen above $70. While the net effect of this will lead to renewed inflation and hitting our wallets, what is the medium-term outlook for oil? All predictions are risky, but it is likely that prices will go right back up into the $100 level, resulting in many attendant problems for the world economy.

If you look at the really big picture, global energy futures are complex. On the one hand, the world probably will not run out of oil (and oil-like substances such as shale, tar sands, liquefied natural gas, liquefied coal) in the immediate future. Besides, according to the fundamental laws of physics, there is plenty of energy available in the current known reserves of various sources.

Research by Harvard University suggests, for instance, that the world