Cheap oil now, high costs later
Cheap oil, of course, is always pleasant to have. According to a joint study by the International Energy Agency (IEA) and the secretariat of the Organisation for Economic Cooperation and Development (OECD), a sustained US$10 increase in the price of a barrel of oil, from US$25 to US$35, would shave at least 0.5 per cent from global gross domestic product growth. That would not cripple the global economy, but it might encourage energy efficiency.
And that is precisely what Saudi Arabia and other oil-producing countries don't want to see happen. Contrary to the supposition that Organisation of Petroleum Exporting Countries (Opec) countries prefer high oil prices because they give them windfall profits, the truth is they would rather have prices ranging between US$22 and US$28 per barrel indefinitely, and keep the world hooked on oil.
The Saudis have been frank about this. 'We've got almost 30 per cent of the world's oil,' Mr Abel al-Jubeir, the foreign policy adviser to the Saudi Crown Prince, noted recently. 'For us, the objective is to assure that oil remains an economically competitive source of energy. Oil prices that are too high reduce demand growth for oil and encourage the development of alternative energy sources.'
These are smart drug dealers. The fools are the dope addicts - we, the consumers of oil.