

Oil and the Arab world's unrest

Oil pressure rising

The world is badly placed to cope with another oil crisis

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Readers' comments



Fascinating article...thank you. In the list of producers, I note that Canada is not listed. Is that an oversight or is Canadian Production very low? Anybody?


El Guapo:

Forget about raising gas tax $ 0.05

Consider: Cost of wars in Afghanistan and Iraq: approx $ 1.8T
Amount of gasoline used in America per year: 125 B gallons.
Number of years of war: 9

Cost of wars per gallon of gas: ($200B/year)/125B gal = $ 1.60/gal.

And that is only part of the public subsidy of America's oil industry through the defense budget:

How much does America's Navy spend keeping sea lanes open for oil shipments?

How much does America spend providing defense, de facto or otherwise, for oil producing nations?

How much does America spend on foreign military aid (e.g., to Egypt and Israel) to keep the peace.

None of that money would be spent if there were no oil interest.

One of the classic lessons of economics is that removing commodity subsidies always makes an economy more efficient.

Artificially subsidizing the cost of oil based fuels in America is NOT helping the American economy. It is damaging the American economy exactly the same way as any other commodity subsidy.

Stop subsidizing the oil industry, and many of these problems will solve themselves.


Isn't the moral of the story: find another energy source, and end our dependence on foreign oil?

Ariam Espinal

I am no economics expert nor do I know much about oil but it seems really crazy how dependent on oil the world is. Looking at the figures in this article, the U.S. is sitting on top 727 million barrels of oil just in case of a crisis and on top of that the U.S. is already the world’s second largest oil producer. How much oil does the U.S. need? With so much oil being produced in the U.S. why isn’t it being exported instead of being imported. A lot of the stigma the U.S. has received in the Middle East has been for taking advantage of their natural resources.


I completely disagree. First "estimates" of production are all over the place. What we do know is the oil terminals in Cushing, OK are and have been filled to the brim with oil. Don't get me wrong, I'm not one of these conspiracy theorist, but prices don't reflect the actual supply situation today. How do you get a realistic assessment of pricing and supply when the yardstick used is to go to the people selling it and ask them how expensive it should be. It's totally ridiculous.
The CFO of Petrobas was quoted a couple days ago that oil will soon be trading at $70. This guy knows what he's talking about. Folks,look at the Economist production chart. Is Brazil even listed? No. Brazil has oil reserves of it's coast which will make it of the largest, if not the largest world producer of oil.
OPEC is a cartel. It and the oil companies are in the business of selling oil. They aren't stupid. The tightrope is pricing high enough to maximize profits, but low enough to discourage alternative energy.
The cat is already out of the bag. Western companies are already being more efficient. Look at cars in the US. Auto companies have managed to more than double mpg in even the worst gas guzzlers.
The truth is that the world is producing more oil every day, not less. That coupled with developments in alternative energies like solar,like wind, like etc.etc., cannot help but tip the supply and demand scale toward cheaper oil.
For several years, I read many intelligent people make pitches why real estate values could never go down. These arguments sound very similar. Be cautious, folks.



After seeing Tunis, Egypt and now Lybia's regimes come tumbling down one after the other, it is dangerously naive to expect the revolutionary wave fade away without reaching neighboring Algeria (BTW, the main supplier of gas to Southern Europe).

Now I'd like to hear the usual suspects say renewable energies are expensive and unsustainable when oil reaches 220 $/barrel.

We're being conned, yet we refuse to acknowledge it. Time to smart up.


little adolf wrote --> "just pray israel doesnt attack iran."

why would Israel attack Iran? being as good of friends as they are and Iran making sure that the Interests of Israel are well protected... why would they protect them? Anytime Israel is made to feel safe and pressured... one of its allies start blowing up something... or Iran says something silly? Why?


We should ask nicely our Saudi friend to increase oil output. If they don't, we'll ship all the democrats there to start a jasmine revolution...


The graph showing oil production by country indicates the U.S. is producing nearly 10 million barrels per day. Nice try, the last time the U.S. produced 10 million Barrels per day was Nov. 1971. It now produces just over 5 million barrels per day of crude oil. The citizens of the U.S. are confused enough about their ability to extract oil in the country please don't feed our ignorance, fix the graph.

Santa Fe

Whether global production rate is at its peak or not, does not matter. The world is not immanently running out of oil. The world is, nonetheless, becoming limited in its physical ability and economic capacity to add production, particularly from the high cost tier of oil resource. This situation will become acute as the 60 percent of the world’s production which is from the supergiant fields starts to decline. It is not a matter of when the oil runs out, rather, it’s a matter of when the supply of money to buy imported oil is exhausted.

Physical characteristics of oil supply in terms of geopolitics and cost of development provide incentives in both economic and foreign policy for the West to reduce its reliance on foreign oil. The West is caught in a foreign policy vise. Due to the need to keep oil supply up and prices down, it is entangled with politically hostile and/ or unstable foreign governments leaving little maneuverability to pursue its self interest. Even less appreciated is the negative impact oil imports have on the Western economies.

The fix is not easy. Oil dominates the energy sector because of its comparatively low cost coupled with the difficulty in replacing it for transportation. Even at prices in excess of $100 per barrel, green energy technologies are far from competitive. Investments in high cost alternatives to conventional oil are risky so long as 60 percent or more of the world’s oil is produced for much less than $5 per barrel. Price forecasting is complicated by a ‘dual-tier’ cost structure dominated by low cost oil coming from the Middle East and the additional need for much higher cost oil to meet demand.

This complex and dangerous situation demands serious debate. The level of understanding by political authorities, academia and the public is woefully inadequate in proportion to what is at stake.

El Guapo

Here's what the United States needs to do:

A. Add another $.05 tax to retail gas and diesel.

B. Put every cent of this tax into grants supporting private research into carbon neutral energy sources and loans supporting carbon neutral production (e.g. algae).

C. Deregulate enough to allow oil companies to drill in non-eco sensitive areas, while still forcing them to pay massive damages if they cause environmental damage. Of course, wildlife refuges and national parks would be off limits.

D. Do away government subsidies to oil production and replace it with a government subsidy to produce another large oil refinery.

Naughty Bits


The United States has some of the cheapest prices for gasoline in the world, while some parts of Europe pays multiple times that of the US so I don't think the solution is pumping more oil closer to home but rather adopting more fuel-saving policies. The average European car is far more oil-efficient than the average American car because Europe has adopted some policies to discourage oil-guzzlers.

Also, the developed world will not bore the brunt of another "oil shock" but rather the developing world, since it is these fast-growing economies that are most sensitive and dependent on cheap energy to grow and industrialize.


Since Obama became President his incompetent foreign policy of bows, apology, and appeasment has been leading to this, with much worse likely to come. Since he took office his refusal to allow oil drilling in Alaska, and his willingness to ignore his own experts to impose a stupid ban on offshore oil drilling killing tens of thousands of high paying jobs, has made disruptions from the Middle East even more damaging. As gasoline in the U.S. goes shooting up toward $10 a gallon, people can no longer afford to heat their homes, and the economy goes back into the tank remember to thank Obama for so loyally paying off his extreme environmental and extreme left wing supporters.


The higher price of oil can only benefit the efficiencies of its use.
Alternative energy sources will prosper.
The problem is will the price of oil go down. This is worse since all efficiency efforts and alternatives created will suffer.
The solution is government control of decreasing prices, through taxation, creating an energy fund.


Wayne Bernard

There is one sure sign of a looming oil supply crisis. When the largest publicly traded oil company in the world states in its 2011 annual summary that, for the past 10 years, it has not been able to replace what it has produced despite spending tens of billions of dollars on exploration, that tells the entire tale.

Here's a summary analysis of the difficulties facing ExxonMobil and how oil production growth is no longer organic, it's through acquisitions:



"another shock akin to the oil embargo of 1973"
just pray israel doesnt attack iran. remember the oil embargo was payback for the US airlift of ammunition, fuel, supplies to israel when they were losing the war. people seem to forget that part. another benefit of being friends with israel.

Ronald Grey

Regarding current unrest in Libya, you're right to say, "The world could probably weather a short-lived crisis."

With 80% of the nation's economy dependent on the oil sector, one indeed needs to consider the potential effects of short-run and long-run price elasticity.

See "How Libya Protests May Affect Oil Prices": http://wp.me/pZiAD-295


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