The knock-on effects of peak oil

Rising prices and greater environmental awareness are among the possible outcomes

IF OIL really is running out faster than is generally realised then the real price of crude should be well over double the current already high price of about $75 a barrel, experts believe.

A level of $200 a barrel was predicted as recently as last year by the investment bank Goldman Sachs and the price did hit nearly $150 just 18 months ago, at the height of the global trade boom.

The sub-prime crisis, collapse of Lehman Brothers and subsequent recession have led to trauma in Dubai, which was built up on hot petrodollars from the Middle East producers such as Saudi Arabia.

A move back to oil prices of $200 a barrel-plus would help revive the sovereign wealth funds, which have become major investors in a host of different western companies and funds.

It would also give a major boost to wind, solar and other renewable power sources, which would be seen as much more commercially competitive.

But the good times could be short-lived. High oil prices have traditionally triggered wider economic turmoil because so much of the global trading system – ships, planes as well as much manufacturing – is dependent on oil.

The Arab oil embargo that was triggered by the 1973 war between Israel and Egypt brought a massive escalation in the price of oil and was held at least partly responsible for the decade's rampant inflation and economic downturn.

The high price of petrol is already a bone of contention for the British motorist and a further hike in the cost on the forecourt would do serious damage to the freight haulage community. There have been new murmurs about fuel protests by lorry drivers and the cost of diesel is already likely to rise as higher taxes are levied in the New Year.

Other fuels used for power generation, particularly gas, are partly priced on the back of crude values so higher oil prices would have a massive knock-on effect.

But if peak oil is taken seriously then it should reinvigorate the talks coming up in Copenhagen to tackle global warming and move as quickly as possible to a new low-carbon society in which oil would become a true luxury commodity to be conserved for the future.