WHY THE PRICE OF OIL KEEPS ON SOARING?

Worldwide, the prices of oil reached unprecedented levels. The record-high $141 per barrel and its continous increase remains unabated. As a result, economic crises are everywhere and the most affected are Third World Countries like the Philippines. Why do we have an oil crisis? Is this something political or just machinations of a cartel?

THE 1973 OIL CRISIS
The 1973 oil crisis began on October 17, 1973, when the members of Organization of Arab Petroleum Exporting Countries (OAPEC, consisting of the Arab members of OPEC plus Egypt and Syria) announced, as a result of the ongoing Yom Kippur War, that they would no longer ship oil to nations that had supported Israel in its conflict with Syria and Egypt (the United States, its allies in Western Europe, and Japan). The same time, OPEC members agreed to use their leverage over the world price-setting mechanism for oil in order to raise world oil prices, after the failure of negotiations with the "Seven Sisters" earlier in the month. Because of the dependence of the industrialized world on crude oil and the predominant role of OPEC as a global supplier, these price increases were dramatically inflationary to the economies of the targeted countries, while at the same time suppressive of economic activity. The targeted countries responded with a wide variety of new, and mostly permanent, initiatives to contain their further dependency. (source: Wikipedia, the free encyclopedia)

THE 1979 OIL CRISIS
The 1979 (or second) oil crisis in the United States occurred in the wake of the Iranian Revolution. Amid massive protests, the Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979, allowing Ayatollah Khomeini to gain control. The protests shattered the Iranian oil sector. While the new regime resumed oil exports, it was inconsistent and at a lower volume, forcing prices to go up. Saudi Arabia and other OPEC nations, under the presidency of Dr. Mana Alotaiba increased production to offset the decline, and the overall loss in production was about 4 percent. However, a widespread panic resulted, driving the price far higher than would be expected under normal circumstances. In the United States, the Carter administration instituted price controls. In 1980, following the Iraqi invasion of Iran, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well. After 1980, oil prices began a six-year decline that culminated with a 46 percent price drop in 1986. This was due to reduced demand and over-production, and caused OPEC to lose its unity. Oil exporters such as Mexico, Nigeria, and Venezuela expanded. The US and Europe got more oil from Prudhoe Bay and the North Sea. (source: Wikipedia, the free encyclopedia)

THE PEAK OIL

The Earth's total endowment, before humans started using it, was roughly 2 trillion barrels of recoverable oil. About half of it is used up. Consumption is currently 31 billion barrels each year. Crunch the numbers and you will see that the oil will be gone in 32 years presuming the rate of consumption does not change. In reality, demand is increasing. Very little oil has been found within the past 30 years and the prospect of finding more is dim. (source: PLANETFORLIFE)

The Peak Oil issue was not so much given attention but was dismissed as alarmist and without basis. However, the consistent low production of oil and the spiralling prices made more people give a seroius consideration of this global concern. Logically, after the peak, oil production will become scarce and high demand will not be met. Gone are the days of the cheap oil era.

Why the price of oil keep on soaring? The answer is basically anchored on the Law of Supply and Demand. According to US Energy Secretary, Oil prices are hitting record highs because production has not kept pace with increasing demands.

ALTERNATIVE SOURCES OF ENERGY

Governments should now consider a change of policy direction in so far as energy is concerned. Alternative sources of energy should now be tapped to address the issue of the coming global oil crisis. Non-fossil and renewable sources of energy such as solar, hydro, wind, biomass and the like have to be developed. The business sector should invest on these ventures to avert a worldwide economic recession due to high oil prices.