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Oil Prices


Regarding the rising price of oil, the first point to remember is that the price of oil is not high by historical standards.

I haven’t seen an exact calculation, but I wouldn’t be surprised if the real price per barrel is maybe half of what it was during the 1970s peak — which itself brought oil to the level of other commodities, tracing from the end of the World War. The oil price had been kept artificially low until the mid-1970s quadrupling of price — which followed a far higher increase in the price of US-produced coal and of US agribusiness products, and was not opposed by the US or the energy corporations for pretty good reasons. Oil and “gas at the pump prices” now are given without adjustment for inflation, which is almost meaningless.

I’m frankly skeptical about the theory you report. I suspect that the oil ministers and analysts are accurate in saying that maybe 1/5 of the price is traceable to investor concerns about security, stemming from the US invasion of Iraq, US support for Israeli expansion into the occupied territories, and al-Qaeda-style attacks on the Saudi monarchy and its whole system. And the rest is easily attributed to normal factors.

It might also be worth noting that there would be great advantages to a much higher price. In our more or less insane quasi-market system, the only means of something like rational planning is market forces. So a very badly needed shift to a sustainable economy cannot be undertaken unless driven by much higher prices. And the problems ahead from irrational use of hydrocarbons might turn out to be extremely severe.

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