OIL prices this week hit new highs, ostensibly due to uncertainty of Iranian supplies. Like any other commodity, however, the price of oil, these days is strongly influenced by market speculation. Investors who have no links to oil production or sales and no desire for final delivery trade oil in forward markets. This adds an extra and arguably spurious dimension to the price created by the normal rules of supply and demand.
Markets, of course, thrive upon movement. Influenced by Saudi Arabia, OPEC has done its best to give some stability to the supply, and thus the price, of oil. Despite this, what is happening in markets at present is beyond the ability of any oil-producing country to control.
The clear lesson to be drawn here is that the world’s major oil consuming nations must do something about their apparently insatiable appetite for energy, the overwhelming majority of which is derived from oil and gas. This reassessment has become even more necessary because of increasing energy demands in Asia, particularly China, which astonishingly is currently bringing on line a new coal-fired power station virtually every week.
The United States remains wedded to the concept of cheap energy. Unfortunately in Europe and North America, continuing prosperity has made consumers able to afford the increased cost of motoring and domestic fuel. Nonetheless, the pips are beginning to squeak for business, especially for energy-intensive processing industries.
When First World companies find themselves losing money because they are becoming uncompetitive, governments will no doubt do something. Reducing energy taxes can only be a temporary palliative. Therefore the solution lies not in lower taxes but in lower consumption as a result of conservation as well as more sensible use of a finite resource. This will have the added effect of easing pressure on the environment.
If conservation campaigns are properly presented, they will engage every citizen in a drive to reduce energy consumption. The simplest steps can help. Electrical equipment does not need to be left on standby with lights glowing. In the UK it has been calculated that if every such device were turned off, the output of an entire power station would be saved. Consumers can convert to low energy bulbs, trade in their gas-guzzling SUVs and turn down their air-conditioning. By such means, they will cut expenses, decrease environmental damage and reduce the costly scramble for oil and gas.
