What price on oil

THE unprecedented rise in the price of oil this year has caught governments and markets alike unawares

THE unprecedented rise in the price of oil this year has caught governments and markets alike unawares.

As demand in China rises by the day, yet production strains to increase, the giddying rises looked, for a while, as if they would never fall.

But the current dip is due to the fact that much of the value oil accumulated was not through vastly increased demand but speculation on oil futures that pushed the price up in a self -perpetuating spiral.

The price drops have come as a relief to some at the pumps, but it is foolish to believe that the danger is past.

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Leading economists are warning that we may be very close to peak oil production, or have just passed it. In which case, failing a sudden drop in demand, oil prices will never fall again.

Some have speculated this could lead to a collapse in the world financial system and the end of interconnected economies and global markets. And as oil companies become more and more worried, we find more and more harmful and less efficient ways to extract oil - pressurising already drilled fields to suck the last remaining droplets from under the seas, stripping away forests and marshes in Canada and the States to access the heavy tar sands underneath.

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The end of affordable oil and hence, petrol, will certainly be a shock to the system. But it need not be feared and prolonged to the last possible moment.

The end of affordable oil should be seen as an opportunity, an economic incentive to finally invest in the renewable power sources that we have known about for years.

Consumer anger over rising petrol prices has led to the government giving in to below-inflation rises in fuel duty, or not increasing it at all.

The Conservatives even propose to cut fuel tax when the price of oil rises. They claim overall tax revenue would be unaffected, yet there is nothing to stop the oil companies doing exactly what they have done in other countries and increase their prices to the amount of the tax cut, leaving the government with a loss in tax revenue and consumers in the same situation as before.

But the Conservatives ignore the fact that the rising prices have led to a mass migration to public transport that has never before been seen.

Journeys on the railways grew 8 per cent last year compared to an economy that grew just 3 per cent.

Bus operators are reporting record profits yet record price rises, something I will cover in another issue. Car companies compete to make the most 'green' cars.

The realisation that we can no longer rely on oil has meant a new energy bill including 'feed-in tariffs' for green energy producers and grants for micro-generation projects.

It is useless to pretend we can turn back the clock and wait for oil to go down to 'normal' levels. But maybe that should be something to be celebrated.

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