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What happens when oil rises to $300 a barrel?
AS I WRECK THIS CHAIR By William M. Esposo
The Philippine Star 2011-05-12
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“At US$300 a barrel, they would be drilling for oil under Buckingham Palace” according to renowned investor and author of best selling book “A gift to my children” Jim Rogers.
Quoted in a May 5 CNBC report, Rogers reinforced his point: “Where is the oil? I still want to know where is the oil? You know why the price of oil is going up? Because there is no oil.” Rogers cited the International Energy Agency, saying that it “has come to the conclusion that the world’s oil reserves decline by six percent a year.”
But even at a decline of only four percent, Rogers said: “That means in 25 years there’s no oil at any price,” adding that rising oil prices will “hurt some people very badly” and some companies will go out of business. Rogers said that the world uses 86 million barrels of oil every day and that the bi oil find in Brazil can only supply two years of the world’s oil needs.
Born on October 19, 1942, James Beeland Rogers Jr. is an internationally recognized American investor and author currently based in Singapore. Chairman of Rogers Holdings and Beeland Interests, Inc., Rogers co-founded the Quantum Fund with George Soros and created the Rogers International Commodities Index (RICI).
Rogers is definitely not a charlatan like many of the personalities that proliferate in our media. While some folks might think that an oil price of $300 per barrel is an exaggeration, there is also no saying that it will not even exceed that price level when the supply starts to run out. Scarcity provokes a buying frenzy that in turn triggers skyrocketing crude oil prices.
Actually, the price of oil could be our lesser problem when we reach the dreaded situation where there is no alternative source of energy to fill the projected supply gap. At least a high price means that there is still supply available. However, when supply becomes insufficient to fuel the world’s commerce and basic human and social functions - national security will become the bigger problem. Internal upheavals and war among nations will ensue. World War II might look like a picnic if and when we get to this point.
It was largely believed that the US and its allies waged the Iraq War in order to secure one of the biggest oil reserves in the world. There were neither weapons of mass destruction in Iraq nor has a link been established between Osama bin Laden and Saddam Hussein to justify the invasion of Iraq. There are worse humanitarian crises in other parts of the world but these never attracted US attention because these countries did not have the oil reserve of Iraq.
The current tension in the South China Sea, with the US trying to invent a role in order to justify its involvement, is all about oil. The Oil and Gas Journal says that the South China Sea has as much oil as Iraq or Iran, the world’s third and fourth biggest oil reserves. This conflict will put the Philippines in the frontline of battle. It is also in anticipation of this conflict why the US wants a presence in Mindanao from where they can have a springboard for confronting China.
Over here, just imagine how those Leftists of PISTON will be rabble rousing when oil hits $300 a barrel. This to them will be the equivalent of the perfect storm. PISTON, in case you didn’t notice, had always taken a radical course compared to the other transport groups. That is because the other transport groups are merely seeking relief from oppressive high fuel prices. PISTON, on the other hand, seems set on promoting a revolutionary situation.
The other transport groups are content with fuel subsidies and the government’s earnest efforts to ensure that the oil companies are not raising fuel prices unnecessarily. They understand the realities of supply and demand and the fact that we are dependent on foreign oil to fuel our homes, factories and transportation.
Have you noticed how PISTON had always belittled the government’s efforts to alleviate the problems of transport groups by fuel subsidies? Have you noticed what they have been proposing as solutions - the removal of the EVAT on fuel and revocation of the Oil Deregulation Law? Have you given it serious thought if we would be better off if the government followed these prescriptions of PISTON?
If the government foolishly adopted the suggested solutions of PISTON, we will find ourselves in a worse situation - one that brings us closer to a revolutionary political condition, which is what the Leftists want. Removing the EVAT on oil products will worsen our budget deficit. There will be less money for public services and subsidies. Revoking oil deregulation will mean subsidizing the energy consumers beyond what government can afford to extend. Per Energy Secretary Rene Almendras, that is something that no economy in the world is in a position to undertake today. Clearly, the PISTON prescriptions will only make life miserable for all Filipinos.
This dreaded scenario of oil scarcity in 20 years leaves us with little choice but to consider nuclear energy. Between the possible anarchy and global instability that an acute energy shortage will create, only nuclear energy is the realistic alternative.
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