We face a worldwide glut of oil, with profound economic and geopolitical implications, most of them good
By Jeremy Warner
July 26th, 2012
So much for peak oil. According to a fascinating new study by Leonardo Maugeri of the Belfer Center for Science and International Affairs at the the John F Kennedy School of Government, we should stop worrying about when the oil runs out and get ready for $70 a barrel prices (using the Brent benchmark). Likely supply of the black stuff has been significantly underestimated, he reckons, with a veritable glut of new production due to come on stream over the next eight years.
If he’s right, we can indeed stop worryng about a lot of things, unless a lover of windfarms and green energy. Petro-power will shift progressively away from its traditional centre of gravity among unstable regimes in the Gulf. Meanwhile, much of the Western hemisphere could return to a pre-World War II status of theoretical oil self sufficiency, with the US dramatically reducing its oil import needs and therefore progressively disengaging from involvement in the Middle East.
Cheaper oil prices will also provide a significant economic boost to major advanced economies such as the US. By lowering fuel costs, a falling oil price is capable of delivering a much bigger stimulus than both fiscal and monetary policy combined. It seems to be unadulterated good news all round.
Here’s the relevant bit of Mr Maugeri’s analysis: