Here we go again! Gas prices are on the rise, which can only mean oil prices are on the rise too! And, when it happens, everyone gets a little itchy. And, here’s some more news you may not want to hear:
The International Monetary Fund predicts oil prices to double by the year 2022 from its historic high of $113 a barrel. The IMF was warned by the internal research team that a permanent doubling in oil prices could have significant implications in global trade.
According to the report, it’s something new for the world economy, which hasn’t seen these kinds of prices for more than several months at a time. This comes on the heels with world markets valuing crude at historically high levels of more than $110 a barrel and with the news from the International Energy Agency that oil consumption would continue to rise the remainder of the year.
Bear in mind that the IMF study doesn’t presume take into consideration how much oil can be removed from the ground. It prefers only the rates of extraction, which depend mainly on the price that companies can charge for the final product.
The report goes on to state that the model isn’t as negative as the pure geological interpretation that generally holds binding resource constraints that stipulate the world’s oil production is on the downward spiral. The prediction is that small additional increases in the world’s oil production will come at the expense of near doubled prices.
Why Oil Prices Are Seeing An Increase
Is it true? As most folks and governments know, continuously high oil prices are threatening the economic recovery of all countries. According to the International Energy Agency, crude prices will stay high throughout 2012 because of tensions in the west and Iran. However, the prices are also high because of unscheduled supply outages and limited spare production capacity.
How Oil Prices Can Spike Downwards
It’s also been debated that the peak oil argument in regards to finite resources will cause prices to skyrocket even more. However, the technological side of the argument says the high prices will cause the industry to look for new ways to extract the oil. However, it’ll also look for ways to combat those prices. How so?
One way to combat these extremely high prices comes in the form of using alternative fuel sources like methanol, ethanol or natural gas. Bring these competitors to the market, which are cleaner and cheaper, could bring oil prices down significantly, ensuring the world economics stay growing and healthy.
OPEC recently announced a similar statement, saying the demand for oil was no longer declining but rather on the upswing.