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

Henry Thompson

Oil prices have ranged from $50 to $150 per barrel over the past few years due to glitches in the delivery system, refining constraints, demand variation, and arbitrary government policie,s but believe it or not the world is not running out of crude oil any time soon.  Current annual consumption is about 25 billion barrels.  Proven reserves are 120 times that, implying supply of 120 years even without new reserves (there will be) and reduced consumption as price rises (it does). 

Economic depletion implies proven reserves would be half depleted with the price tripling after a century, not the typical doomsday story.  Potential reserves, including fracking and deep sea drilling, extend supply for many centuries. 

All the problems with the oil market are above ground.  Wasteful governments own most of mineral rights.  Government policies restrict refinery construction.  Oil exploration is curtailed due to environmental regulations.  Investors in alternative energy lobby for subsidies and restricting oil. 

Over the decades, the rising price of oil will lead to improved technology and alternatives if markets operate freely.  Regarding the volatile price of gas, avoid short term panic and do not expect government policies to offer remedies.