Tuesday, June 17, 2008

The oil era reaches its desperate endgame

Saudi Arabia appears ready to cave in to demands from Western governments for the kingdom to make special efforts to increase its production of oil. Analysts forecast that the world's largest producer will shortly raise its output by half a million barrels a day. The United Nations Secretary-General, Ban Ki-Moon, confirmed this impression at the weekend after emerging from talks with the Saudi monarch, King Abdullah.

What we are seeing in this desperate horse-trading is the endgame of the oil age. Even if we have not yet reached the inevitable moment of "peak oil", when production begins its inexorable decline, it is abundantly clear that the age of cheap fuel is over. The economic leaps forward by China and India represent a step-change in energy demand. The rate of discovery of new oilfields has failed to keep pace with the speed at which nations are joining the global economy. That means the price of oil will remain considerably above the level to which we have historically been accustomed.

That is the central fact that governments ought to be addressing. It is ridiculous for the Saudis to attempt to tell Western governments how they ought to tax fuel sales, just as it is ridiculous for Western governments to tell Saudi Arabia and other oil producers how much they ought to pump out of the ground. The debate ought to be about how best to break our economic dependence on oil.

From yesterday's Independent; The oil era reaches its desperate endgame