Here’s an interesting article from oil-price.net. It’s a pretty good little site I use to monitor the oil price now and again and they have some good articles about issues in the oil industry.
Basically they are saying that in the next few months an increase in demand will push the price of oil up as oil producing nations tap into their reserves. Now a few of you that have been following peak oil debate’s know that the Saudi’s have been cooking the books for a while now but the Arab spring has added a new dimension to this problem.It’s no secret that Saudi Arabia, in a desperate attempt to hold on to power, is trying hard to win back its people. After all, the wave of massive protest for democracy did shake the Middle East. So what does it do? Take this: King Abdullah’s has announced generous subsidies to construct 500,000 houses for the poor, a friendly mortgage Law for the common man to buy property, finances for infrastructure, religious organisations, and for improving the education and health system, a pay rise for workers in the public sector, unemployment benefits, and more education allowance for students. To be sure, it also helps that the country has massive reserves for all the Spending, thanks to oil. In two packages, the first announced in February for $36 billion, and the second in March For $94 billion, the ruler is fighting to win back his people. Together, the $130 billion is equal to 30 percent of the Kingdom’s GDP or revenues from oil export for eight months.
And here’s the kicker pay attention to the last sentence.Saudi Arabia, essentially, is putting more oil on the market to pay for generous welfare programs, basically “buying out” its population from joining in on the unrest that spread through other oil producing nations. This is unsustainable and will accelerate well depletion. At this point, no one knows the actual reserves of the country, which is dangerous in itself.
So what’s the solution to all this… Well the IEA in august released oil from the strategic reserve for only the third time since it was founded in 1978. That this reserve is supposed to be used in a time of war should let you know how close we are to demand out stripping supply. As many of the new economies gather pace and their citizens become more affluent they tend to copy western models of spending and buy more goods. Can’t blame them really, would you give up your car for a donkey so someone else can ride in Mercedes?
And so as the world population increases to 7 million and the IEA try to replace the strategic reserve expect oil to start hitting the $130 dollar a barrel mark sometime next year.
Whilst I don’t expect Sainsbury’s to be empty come the first of January 2012 I would expect food and fuel bills to start increasing, putting pressure on already stretched house hold budgets and stalling the slight economic growth we currently have.
Just remember the Arab uprising’s this year all started out as protests and demonstrations against rising food and petrol cost’s. Pardon the pun, but its food for thought…….