Is the Oil Economy Nearing Meltdown?

Commentary by the editor of European Oil & Gas Pipeline News on Goldman Sachs 'super spike' projection.

Published: 03-Apr-2005

"...The cost of crude oil approached record levels today as markets were unnerved by a Goldman Sachs report predicting a 'super spike' in oil prices to $105 (£55.66) a barrel," reported the Guardian on Friday. But it wasn't an April Fool's joke.

Such a "super spike" is part of the scenario envisioned by scientists and analysts tracing the possible timeline inherent in the "peak oil" hypothesis. Different people draw different repercussions from it, one being that surging demand for a finite resource is causing sharp geopolitical tensions as major powers like the US, EU, Russia and China stake their claims on the precious black liquid. Most proponents of the theory see a bleak future of economic shock and failure in an increasingly industrialized world after it becomes unable to meet its growing energy demands. According to the SMH, peak oil is "...the theory that the world will face a sudden, cataclysmic decline in supplies after global production peaks in the next 20 years." The US government is starting to take the threat seriously.

Adds the Guardian: "...the bounce in prices came after Goldman Sachs, one of the world's biggest traders of energy futures, issued a report yesterday saying that markets had entered a period in which strong demand and tight supplies could cause a 'super spike' in prices. According to the report, energy prices will only return to lower levels once they hit a level at which demand weakens and spare capacity is created."

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