What’s up (and down) with the price of gas?

Henry Thompson

Oil prices have ranged from $75 to $150 per barrel over the past few years due to glitches in the delivery system, refinery constraints, demand variation, and government policy. Believe it or not, the world is not running out of crude oil any time soon. Current yearly consumption is about 25 billion barrels and proven reserves 120 times that amount. There are 120 years of oil even if without new reserves (they will be) and reduced consumption as the price rises (there will be). Proven reserves will be half depleted and the price tripled after a century, hardly the doomsday story typically of journalists and environmentalists. Potential reserves are much higher.

The problems with the oil market are above ground. Governments own most of the oil rights and generally waste a good share of the revenue. There have been no new refineries built in the US for over three decades due to regulations. Oil exploration and extraction are curtailed due to environmental laws. Most of the earth has not been explored due to political uncertainty.

The slowly rising price of oil will lead to improved technology and energy alternatives over the decades if free markets are allowed to operate. The US energy industry will remain the world leader unless the government decides nationalize mineral rights.