PJ Media

How Oil Prices Could Collapse

Do you think $140 a barrel is insane? Last week the president of OPEC Chakib Khelil predicted $170 a barrel by summer’s end. More sobering, this week the U.S. Energy Information Administration forecast world energy use to grow fifty percent by 2030.

If that pans out, it would mean the world will need to burn more than 120 million barrels of oil that day. We have it, but can we afford it? Nope, and that is why the oil domain is crumbling.

Hundred of thousands of hybrid cars are being disgorged from Japan to Europe, deeply cutting gasoline use. Those who dismissed solar energy a decade ago as esoteric now embrace it. Fly over entire countries like Israel and Cyprus and much of southern Europe, all with plenty of sun but no oil, and watch millions of solar panel reflectors stare back at you.

And that big bad wolf of energy, nuclear, will come back. It has already saved Europe’s economies from successive ravages of oil. Massively adopted forty years ago as the energy solution by France, the world’s fifth ranking economy, nuclear today produces seventy percent of that country’s electricity and huge exports to Europe.

There will be a monopoly for oil until we invent something else that can move the car engine. But even General Motors is hard at work on an alternative engine because at $5 a gallon money talks.

Efforts redoubled elsewhere into coal and wind, with these giant wind energy columns now peppering landscapes across Europe and even in oily Texas.

As it happened before, alternatives will crack this energy gig. Right now the world of oil is split among new provinces like America, Canada, and the North Sea — which have given much of what they have — and old provinces like OPEC, Saudi Arabia, and Venezuela, where the rest of the stuff lies.

This is where the rubber is hitting the asphalt and producing mind-boggling prices. As we run out of the “secure” province supplies located under Western control, we are falling to oil controlled by potentates and failed regimes.

The North Sea oil, for example, was discovered in the 1960s between the UK and Norway. Oil companies under international contracts flung that territorial sea wide open, taking it all the way up to a peak of six million barrels a day in 1999 from virtually zero in 1970. They worked under universal rules of law. These are not the rules by which Saudi Arabia and OPEC play.

The same oil companies working in Saudi Arabia discovered all that oil in the 1930s and 1940s and set up production until nationalized and kicked out as partners in the 1970s. They now work there only as hired hands. As a result potential production of millions of barrels is locked down. The same goes for OPEC.

To be sure readers of this column have argued these are capitalist rules — their oil, their move. But globalization demands leveled playing fields, not monopolies. What is sure is that the time for an alternative to oil is now.

And it can break the bank as it did before. Back in 1973 Arab oil producers led by Saudi Arabia imposed a cutoff of oil to the USA and Europe. Prices shot up to the equivalent of $100 a barrel in today’s dollars and we were familiarized with what is known as the global oil crisis. While some menaced war, oil companies took off looking for new provinces and found them — like the North Sea, which started pumping from zero in 1971 all the way up to its six million barrel a day peak of 1999. So much new oil was found elsewhere that OPEC’s share of world supplies dropped to forty percent from nearly sixty percent.

And prices collapsed as a result, until they resumed their climb two years ago.

Wanda knew it and said it too often. That’s the legendary Wanda Jablonski, whose life as a prescient journalist, business editor, and publisher is being grandly celebrated this week with a new book properly titled Queen of the Oil Club, by Anna Rubino.

Reading the book, it becomes clear that we heard it all before but did not pay attention. Although Wanda had a weakness for those oilmen who run the business, she always posed the alternate question. She was so insistent a voice in raising questions about oilmen and their world that they had a less flattering moniker than “queen of their club,” giggling that she was a “buster” of a delicate part of male anatomy.

As you read Wanda’s story and that of the oil she singlehandedly turned from a simple commodity into “black gold” and the stuff of global crises and wars, you can pick up the message: look for the alternative, now.