Supply-driven oil production will mean continued high prices

Oil prices of $150 a barrel now look like a distant, scary memory. But so-called


As 2008 drew to a close, the market began to correct itself and the US cut oil imports by 500,000 to 750,000 barrels a day, according to the Oil Market Consultancy Service. One major reason for lower prices was expectation of lower consumption during a western economies recession.

Some OPEC producers, such as Saudi Arabia, now appear to be cutting production, as they pledged to in December. And when prices start to rise again, further investment in oil production will become more likely.

It looks, then, as if the extreme prices of last summer were a result of a peak in credit, not oil production, and that market pricing mechanisms have temporarily restored market equilibrium. Some oil is now being conserved underground for future use, allowing more time for the development of alternative transport technologies.

That, at least, is a conventional view.