21 June 2011

Oil Prices Will Keep Rising

Tony Daltorio writes, "According to the International Energy Agency, the oil cartel (OPEC) will make $1 trillion in export revenues this year, a new all-time high. Talk about a gusher!...Oil now costs more than $100 a barrel. And oil production has been on the rise as well."

That's bad enough. But it gets worse:

"Unfortunately for consumers, higher oil prices are here to stay. The Institute of International Finance notes that Saudi Arabia will only be able to balance its budget if oil prices are at $115 a barrel in the future. And it isn’t the only one that needs prices to climb further; other members of the six-nation Gulf Cooperation Council are announcing similar spending plans. Kuwait, for one, will issue a $4,000 one-off bonus per citizen and free food staples for more than a year.

"Such social spending will press oil prices higher still. It will also reduce available funds for state-owned oil companies to invest into adding future production capacity. And as governments in the region continue to feel under threat from social unrest, they are less and less likely to cut into public energy subsidies."

We can do something about this: Get off the oil standard.


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