What $100 oil means to you
Posted 12 March 2008 at 2:10PM by Ian Betteridge in Investment and finance
On Monday, the price of oil hit a new record high of over $108 per barrel, and it looks like it may stay that way for some time.
Those who think that the price of oil will drop down to its previous levels of between $14-40 per barrel are, sadly, living in a fantasy world. Demand for energy - which, at the moment, means oil - have never been higher, thanks to the ongoing development of the Chinese economy. And oil producers have simply refused to do what they did in the past, bailing out the rest of the world by pushing up production.
According to Mark Anderson, publisher of industry analysis newsletter Strategic News Service, the floor for oil prices in 2008 is likely to be $70 - which means that the cost of energy will have close to doubled in less than three years.
What does this mean for business? Firstly, if the price of oil remains over $100 a barrel for any length of time the debate about renewable energy will shift from being solely about its impact on the environment to its impact on the economy.
Some companies, including BT, have started to shift to using renewables for environmental reasons, but with oil at this price, wind wave and solar start to look much more attractive economically too.
The second likely impact is simply that manufacturing and transport, the two areas hit most by rising oil prices, will be squeezed very hard indeed. This, coupled with the credit crunch, may make the outlook for the economy more bleak than it has been for many years.
Of course, problems for one sector are usually an opportunity for someone else. Companies which make low-energy products, or who have invested in reducing their energy needs already, will do well out of the high price of oil.
And this is the key element that smaller businesses need to take note of: the high price of oil means that energy saving is no longer simply about being "green" - it's about maximising your company's chances of surviving a world where oil is no longer a cheap commodity. It's moving from a low priority "nice to have" item to something that's vital for your business.
Tags: bt, bt broadbandoffice, energy, environment, oil, renewables, solar power, wind
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Comments
2. At March 12, 2008 5:24 PM, Carl wrote:
Great and informative post!Coming from a third world country, South Africa, I have witnessed how the third world nations are explioted for their natural resources and end up not developing within. This is a testament to the greedy and often corrupt governments as much as the global capatilist market though.
Can't blame people for trying to get rich quickly can you?
I hope the oil prices do give more urgency to go green as the benefits are their for all to see.
3. At March 12, 2008 8:23 PM, dan mcdonald wrote:
we are at war with the arab world and they are winning
not by arms but by commerce
by keeping the oil price high they are destroying us more than they could if they and some say they have nuclear weapons by stopping growth in the west they make us weaker its time we changed to renewables and then there power over us would be deminished i love our countryside and dont want it destroyed but i love my familay and job more so bring on the wind farms bring on the hydro dams we may not all like the look of them but our kids will see them as monumnets to what we did to save the west and the planet
4. At March 12, 2008 10:28 PM, steve wrote:
As a taxi proprietor the recent increases in fuel prices are obviously having an impact on my business. Licensed by the local council we are only allowed to put in for a fare increase once a year (november).As a body we voted not to increase the fares last November since when fuel prices have gone through the roof.We now cannot get an increase until next November by which time many local taxi firms could well be crippled.If there are less taxis available then more people will be forced to use their own vehcles adding to congestion and enviromental problems. Both central government and local councils should be looking at ways to encourage people to use the train/taxi systems to travel to work therefore reducing both cogestion and enviromental problems. Sadly train passengers suffer price increases for a sub standard rail service and taxi owners are left to fend for themselves. with less people on the railways and increased fuel prices taxi owners are forced to run older less efficient cars for longer.Come on now its not rocket science is it, provide a good reliable reasonably priced rail system, reduce the fuel price burden for taxis/buses so that we can reduce our prices and i'm convinced that that will reduce the number of cars on the road.But of course that is'nt the real aim of the government is it? Tax Tax Tax and more tax is the real aim and stuff the enviroment.
5. At March 13, 2008 9:15 AM, Mick Foley wrote:
Seriously Dan? "we are at war with the arab world "?! (A short quote I know).
We are not at war with the arab world because, you see (to quote the late, great Bill Hicks.) "A war is when two armies are fighting". Our brave and fearless (thoughtless?) leaders are fighting a campaign against terrorism not a war.
On a more serious note, if you think that high oil prices cause more damage to our way of life than a nuclear bomb, then I suggest you send a letter to that effect addressed to the Japanese government entitled "RE: WWII". Wake up cheif the point was made correctly by Ade, long before your racist hat was thrown into the ring. Face it bub you're one of the clueless masses who belive what's on the T.V. only BT will protect us from this ignorance!
On the subject of "monumnets to what we did to save the west and the planet.": The "West" is only a construct of our collective imagination, at the next polar shift (magnetic not true North and South and not imagration issue sonny) East and West will have no meaning and your monuments will be no more than monothiths to the too little, too late policy that your beloved West has settled on as a combat to climate change.
It's just like my buddy The Rock says to me, " Do you smell what the Rock is cookin'?"
-Bang Bang!
Mick Foley
6. At March 13, 2008 10:34 AM, Dee L Suss wrote:
When did we go to war with the arab world dan? I'm sorry but I must have missed that memo. Whilstoil does give certain individuals and organisations who may be inimical to western nations a degree of economic power your rather paranoid view isn't all that helpful.
Steve hits the nail on the head though. Whilst it remains substantially cheaper to drive between cities rather than take the train, especially if there is more than one of you, people are going to continue to do so. Investment into our public transport infrastructure must be made a priority.
7. At March 13, 2008 1:05 PM, Carl wrote:
I find Dans post a bit narrow minded.
If the "West" is so great then why did they allow capatilism, the "greatest" product of western ideology to date, to dictate our own way of life by allowing the oil companies to do so?
Opec have the monopoly to do with the oil as they want, this is as a result of our "great western" society.
People need to stop looking at our differences and look at what we have in common. Im not for a one world government or anything of a sort, but please dont try and belittle a nation because their entrepeneurs have thrived and exceeded in their capatilist aims, after all, this is a result of westernisation.
8. At March 14, 2008 10:41 AM, Graham wrote:
What everyone is forgeting is that when you pay £4:60 a gallon at the pump, most of that goes to our very greedy govenment in tax. Before we start telling other people how to run thier lives we need to put our own house in order. I have just returned from South Africa, fuel is a lot cheeper than ours, the people are a great deal happier than us, (Black & White) do not believe everything you read in our press about the African countries. If you watch They think it is all over on the TV, the opening cartoon is so correct. Us garding the oil states, then when it is gone we run. Please remember the war is soly about oil, nothing else. The top and bottom of it all is MAKE our govenment reduce the tax on fuel (You voted them into power)
9. At March 14, 2008 1:44 PM, Mick Foley wrote:
Good point Graham, however I'm guessing you mean "Have I Got News For You?" and not "They Think It's All Over"?
Regardless of this our man G has a point. It was us (assuming you are reading this from the UK) who voted for this shower, the least they can do - before the tories take our tax for the next eighteen years - is to implament a fair fuel tax. OK I don't drive so I find the crocidle tears of private car owners a bit cloying, but surely big Gordon could be easing off the transport industry? (I refer to Steve's post on the whole taxi/train-gate thing.)
Anyways enough on this Wrestlemainia XXIV is only eight weeks away! C'mon people order now on Pay Per View!
- Bang Bang!
Mick Foley
Have a nice day!
10. At March 15, 2008 3:58 PM, boon wrote:
HAHA steve very good taxi services REDUCING their prices!!! Lets get real what we really need is price stability. Nobody will lower their prices if it makes them a comfortable profit. The real issue is if prices dont stabilise and energy prices continue to double then we are all headed for a long wait at the dole queue - because prices dont come down they increase - its just a matter of how often and how much.
11. At March 17, 2008 1:34 PM, Carl wrote:
In responce to Graham and his bit on South Africa.
People in South Africa are complaining about the fuel price. When we convert the cost of fuel in the UK into the South African Currency then it is higher then what they pay at the moment (R15.00 to the Pound). Bare in mind that in South Africa the minimum wage is the equavilent on +- £250/month. Fuel is expensive in South Africa when your living there.
12. At March 18, 2008 11:27 AM, PAUL HELMN wrote:
All commodity prices will rise due to continued rise in the earths population. eg England in the 15thC was 4 million, now 60 M. Coupled with weather change and worst of all governments have to have continual growth to survive. Either we stop this growth or the earth will stop it for us.
13. At March 18, 2008 11:33 AM, Wendy Clark wrote:
What does $100 dollars a barrel mean?
It still means the same to us as it did before. It still means we have to drive our goods into London where our business base is situated (try carrying 5 boxes of fluorescent tubes on your back through the London Underground). It still means our transport costs increase and it still means that the end user pays the price thereby adding to inflation. Vehicle users are driven by what they have to put in to drive it. The up and coming alternatives to petrol and diesel should be rolled out quicker and at reasonable cost, not at the £50k banded around for the hydrogen car's debut which is still an infant in terms of efficiency.
Alternatively, we could all go back to candle power, horse driven carts and cooking over wood fires, somehow I don't think it would catch on with the cosy way the majority are living now.
14. At March 19, 2008 7:58 AM, Mick Foley wrote:
Wendy, $100 a barrell means that a barrell of refined oil now costs either $100 or an equivlent ammount in another currency (e.g. £60ish or AUD$150,000). However it also means much more than this, it means were all going to die soon.
I reason thusly:
1. We (as a population of the planet) burn all the nasty stuff we're not meant to burn.
2. Not only do we come to depend on it for heat, fuel and transport among other things, but, it knackers the only known planet in the universe which can definately sustain our lives, nevermind comfort.
3. With the planet ruined and only the shower at NASA to help us stand a chance - oh god no!
4.Humanity ends.Have a nice day!
-Mick
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1. At March 12, 2008 2:57 PM, Ade wrote: