Thursday, April 27, 2006

The Topic Du Jour

I’ve posted before about how I think its best to live with oil for the rest of the Oil age. Right now it’s the topic du jour. The lads over at in fact ah have a good post on it which I’d like to address. They seem to accept the concept that we are reaching ‘Peak Oil’ but I doubt that we are. I think the price is high because global unused refining capacity (the amount by which supply of refined oil is greater than the demand) is very slim and that an awful lot of available supply/production/refining is correctly thought to be located in fragile areas. That is the small picture. The big picture is there is still an awful lot of oil and the Oil age will not end with us burning the last drop of oil, the Stone Age didn’t end because we ran out of oil. If more refining capacity is built, all things being equal the price will come back down.

The oil producers are in a sweet spot right now, they are producing to the absolute maximum and at a record high price. Governments are in the same sweet spot because the greater the oil revenue the greater their fiscal take becomes. The real dynamic is the billions that are being collected by these two groups and what they decide to do with it and that is what I addressed in my initial post. It is a once in a generation opportunity.

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