Why Is Oil So Dear?

More

It's not complicated. And the reason isn't Obama. Prepare to be astonished, but as the invaluable James Hamilton explains, it's all to do with world supply and demand. Current global production and consumption run at about 87m barrels a day. If the price had not risen over the past ten years, demand today would be around 100m barrels a day, Hamilton estimates. It took higher prices to hold demand equal to the available supply.

When it comes to global supply, the only country with meaningful short-term discretion is Saudi Arabia. Hamilton starts by quoting the Saudi oil minister...

"There is no rational reason for high oil prices," writes Ali Naimi, Saudi Arabian Minister of Petroleum and Mineral Resources, in today's Financial Times. Well, I can think of one-- if oil prices were lower, the world would want to consume more than is currently being produced.

... and concludes

The question is not whether there is a rational reason for high oil prices, but rather whether there is a rational reason the world is not producing 100 million b/d today. And if anyone knows the answer to that question, it should be Saudi Oil Minister Ali Naimi.

That about sums it up.

Jump to comments
Presented by

Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

Get Today's Top Stories in Your Inbox (preview)

When Will Robots Take Over the World?

"In a sense, we're already becoming cyborgs."


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Video

The Origins of Bungee Jumping

"We had this old potato sack and I filled it up with rocks and dropped it over the side. It just hit the water, split, dropping all the stones. And that was our test."

Video

Is Trading Stocks for Suckers?

If you think you’re smarter than the stock market, you’re probably either cheating or wrong

Video

I Spent Half My Life Making a Video Game

How a childhood hobby became a labor of love

Writers

Up
Down

More in Business

Just In