The oil price spike of 2008 was quickly forgotten in the haze of economic recession, but Libya's revolution could put innovation back on track.
In July 2008 oil prices reached $147 a barrel and suddenly energy prices were on everyone's agenda. Soon, oil prices fell as the economy faltered and people moved on to the more immediate concerns of keeping their jobs and businesses alive. Now, as events in Libya provide a specific scenario for a supply disruption, predictions of oil at $200 a barrel are beginning to proliferate. Investment bank Nomura projects the price of oil could hit $220 a barrel. We're about to return to 2008 prices.
How quickly we forgot the hardships of high oil prices. Back in July 2008, American Airlines reported that the cost of jet fuel per passenger to fly from Los Angeles to New York was $500, even as the airline was selling tickets for $390 to fill its seats. At the peak oil price in 2008, Dow Chemical explained that its petroleum costs would be $32 billion, up from $8 billion in 2002. Sales of hybrid cars expanded, and Toyota announced they had sold the one millionth Prius in May 2008.
Stated simply, our economy runs on oil. Yes, it runs on coal, natural gas, nuclear power and a bit of hydro and renewables as well, but none of these have feedstocks that are as volatile as oil. So what happens when one essential component in our economy goes terribly out of whack?