Oil bell may ring in world shortage

PARIS: In its February, 1920 issue, the National Geographic Magazine wondered, in an article by George Otis Smith, the director of the US Geological Survey, 'Where will our Children Get It When American Wells Cease to Flow?'

By that time - only 60 years after the world's first oil well came on stream at Titusville, Pennsylvania - the magazine estimated, 'we have already reached the point where we are consuming more oil than we produce'. "

Of course, technology and oil discoveries enabled the United States to continue producing at far greater levels for several decades more.

Nevertheless, that old article shows that there is nothing new about the concern regarding depletion of a commodity on which the industrialised world, and rapidly developing great powers such as China and India, are so heavily dependent.

Now, with oil having recently peaked at 70 dollars a barrel, a record high price even though not the highest in real terms after inflation, politicians and industry analysts are asking whether the world itself has reached a similar tipping point-the point at which consumption starts exceeding production and prices climb inexorably upwards.

French Prime Minister Dominique de Villepin is one of those who believe we have reached such a point. The time has come to prepare for the "post-oil era", he said in a radio interview earlier this week. "We must all incorporate this change in our behaviour and reduce consumption."

Venezuelan president Hugo Chavez has put it more bluntly. "The world should forget about cheap oil," he said.

The sudden leap in oil prices, exacerbated by Hurricane Katrina, is the latest in a series of oil shocks in the past three decades-the most serious being those sparked by the Arab Israeli war in 1973 and the Iranian Revolution in 1978-1979.

There is, according to Swedish scientist Kjedll Aleklett a major difference between the current oil crisis and the earlier oil shocks. There was a political reason for them-war, revolution-but today the crisis is caused by a combination of unprecedented demand, a shortage of refining capacity and the fear of strategic shortages to come.

[ read the entire article... ]