How high will oil prices go?

Oil prices, at $100.00 per barrel, are again turning the world into a frenzied atmosphere.  Absolutely, it is an extremely hot issue in a relatively cold season.  Nobody wished for it, not even the country’s giant retailers.  Unfortunately, like a ubiquitous cane of an amputee, it will be a permanent fixture in our daily routine.  It is simply unavoidable.  However, our gratitude to the cushion the strong peso has provided, its truest impact wasn’t fully felt.

A bit jittery late last year, the public transport sector staged an unsuccessful nationwide strike to dramatize their demand for a rollback in oil prices.  With the hope of gaining immense popularity, as usual, left-leaning cause-oriented groups joined them and tried to make it a political issue. 

Oil prices are no political issues and therefore, rallies and demonstrations will never solve this problem.  These will only worsen it.  The fact is, even if granted emergency powers, President Arroyo can’t influence the global market driven oil prices.

The reality is, giant oil fields are aging and new discoveries are scarce.  Some great oil finds between 1930 and 1960 are more than 40 years old.  Some of these oil fields have peaked several years ago and are on the decline in recent years.  Even the Ghawar oil field in Saudi Arabia, the world’ biggest oil field which was discovered in 1948 has declined in recent years. 

Though in 1948, its size was reportedly between 66 to 150 billion barrels, and supplied half of Saudi’s oil out for decades, the country’s production in 2007 dropped by 6% (from 9.15 million barrels per day in 2006 to 8.62 in 2007). 

Likewise Mexico and China are nearing peak as well.  Mexico, the second-ranking supplier to the United States after Canada, peaked in 2004 and is now in steep decline.  Experts even boldly predicted that Mexico could be an oil importer by 2015.

Respected geologists believed that “it is almost inconceivable now that major fields remain to be found”.  If we can find one, it should be relatively small.  Despite its sizes, some could be commercially viable.  However, with dolphins, whales and sharks going to courts (like the ones in Tañon Strait) to protect their habitat, development of new wells could be a remote possibility.

Several studies of highly respected geologists have been made.  Kenneth Deffeyes for one, said in his 2005 book, Beyond Oil, that in his opinion the peak will occur in late 2005 or in the first few months of 2006.  Youngquist and A. M. Samsam Bakhtiari of the Iranian National Oil Company each projected that production would peak in 2007.   The more disturbing result from these studies have been the one of the Energy Watch Group in Germany, which recently analyzed oil production data country by country.  They also concluded that world oil production has peaked. They project it will decline by 7 percent a year, falling to 58 million barrels per day in 2020.  Even if the recent world consumption that is estimated at more than 80 million barrels per day stays, the world will thirst for oil by then.    Oil prices will be unimaginable.

Then, forget about travels since airfares will be exorbitantly priced.  Demand for cars will plummet.  The manufacturing sector will be severely affected.  Consequently, unemployment rates will be uncontrollable. 

Knowing that the prospect of finding new wells is remote and the quest for alternatives have just started the immediate solution is demand reduction.   I mean, a worldwide demand reduction.   Our consumption is a pittance, very negligible.  It won’t matter at all.  The world’s biggest consumer is the USA.  They consume more than 20 million barrels a day or more than ¼ of the world’s output.  As 88% of the US workforce travels by car, the bigger chunk of this consumption is eaten by this sector.  If they can be influenced to use public transport, then their consumption will certainly go down.

While waiting for the Americans to consider this option, however, we must honestly pursue our bio-fuel initiative.  Also, the government and the environmentally concerned citizens must gather themselves in a conference table to thresh out whatever issues that need to be addressed for the development of the potential oil reserves along Tañon Strait.  If an environmentally conscious Canada can develop its oil reserves and made it as one of its viable export products, then why can’t we Filipinos or, should I say Cebuanos do it.

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