Thursday, December 6, 2012
Geologists and analysts are concerned that our oil supply won’t grow as quickly or as easily as it used to. We’ll have to resort to harder-to-drill oil, which makes it more expensive oil. And high oil prices could act as a drag on growth.
This is the basic idea behind ‘peak oil,’ and there’s plenty of cause for concern. Between 1981 and 2005, world oil production grew steadily at about 1.8% per year. After that, oil production appeared to plateau. And, since demand for oil kept rising, especially in countries like China and India, prices soared. Oil doesn’t get much cheaper than $100 per barrel these days. And that, some economists say, has acted as a drag on growth around the world.
How bad could peak oil be? The IMF tackles that question in a new working paper, “Oil and the World Economy: Some Possible Futures.” The authors don’t make any definitive predictions about how the oil supply will evolve; rather, they model a number of different situations in which oil becomes scarcer and the world tries to adapt.
The various scenarios examined: Oil production grows very slowly or plateaus; oil production grows at a slower rate, but the world adapts fairly easily; oil production grows at a slower rate, but the world can’t find substitutes; oil turns out to be far more important than most economists had assumed; oil production starts shrinking rapidly.
Posted by Unknown at 11:27 AM