Why we should love high oil prices

This extreme change in the cost of the basic fuel that drives the world economy ought, on the basis of experience in the 1970s and 1980s, to be causing mayhem in financial markets and panic in treasuries the world over. It ought to be depressing consumers and devastating share prices. But strangely – or not so strangely, on deeper reflection – it isn’t.

For a start, it changes the power structure and investment profile of the global oil industry. At current price levels, oil companies can exploit deep offshore deposits in the North Sea, the Caspian and the Gulf of Mexico, and reopen smaller, depleted wells in Texas and elsewhere. The present phase of high prices will help both to retard the exhaustion of oil and to accelerate the search for alternatives. It may be uncomfortable and worrying in the short term, but in the long term we may even be thankful for it.

telegraph