Why oil prices are not too high

Recently Davide Tabarelli spoke again about the oil problem. We already talk about Tabarelli, professor of economics and energy and president of Nomisma Energia. Two months ago, oil price was about $100 per barrel, and we were talking about the shadow of $150 and related scenarios. Today a barrel of oil costs abput $130, and $150 is nomore a shadow, and the worst scenarios seems to be near.

But we still don’t pay enough for oil. We don0t pay enough because we still don’t want a market regulation. As Tabarelli says, we are facing a market failure, above all if we consider that U.S. Congress is about to intervene. We know, for example, about the quarrel on summer gas tax break.

Why market failed? I believe the first reason is the OPEC, which regulates the oil supply, distorting the market. Tabarelli estimates that OPEC states will gain about $1000 billions.

Oil demand raises dizzyingly, above all because of emerging markets: oil supply stands, oil demand raises, as consequence, price raises.

Why doesn’t OPEC raise oil supply? We know there is a lot of oil underground. But we have to consider that OPEC countries are arab countries: from 9/11 these countries are closing towards western world. Moreover Arabs haven’t a high technology for oil well, in order to improve the extraction. Lastly, oil producers have no interest in raising the supply: many countries are talking about alternative energy sources, like biofuel, so I believe it’s obvious they want to pump money out of them.

Not only limited supply: there are further speculations. Let we think about black markets: limited bread, high speculations. For oil it is the same, but it is legal. Tabarelli remembers that a barrel of oil costs $5 in Saudi Arabia. We pay it $130, and it seems to be not so much.

We must find new ways (without any bias, like the one I read about cold fusion), and above all, begin to use the existing one. Diversification must be the keyword. Environment and wallets will thank.

Please, this blogger isn’t a native english speaker.
Corrections and feedbacks are welcome.
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