What Does Oil’s New High Mean?

The fact that the world is having a hard time expanding oil supply fast enough to keep up with even modest demand growth is beginning to be accepted in some corners of the oil industry. The CEO of Royal Dutch Shell and the U.S. industry-dominated National Petroleum Council have both stated that supply constraints are likely to put continued pressure on world oil markets in the years ahead.

Although the dreaded phrase “peak oil” is still used mainly by oil industry mavericks like Matthew Simmons and T. Boone Pickens, their views—if not their language—do appear to be spreading to the mainstream. Last week, oil analysts at Deutsche Bank concluded that steep decline rates of some of the world’s largest oil fields will limit future growth in oil production and could push oil prices to hit $150 as early as 2010.
It’s high time for governments around the world to wake up to the new oil era we have now entered. There are lots of ways to reduce dependence on oil, starting with more efficient cars. But it won’t happen without political leadership.

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