The world is experiencing rapid transformation in both economic and political ways. One issue that stands out, is the feeling that the age of oil is coming to an end. It can be delayed, but sooner or later, we will have to adapt to a world without oil. Big transformations often create fear. (there was a time when we would fear railway lines being laid through the countryside).
Rising oil prices hurts people's pockets, and there are calls for governments to try and prevent oil prices rising too rapidly. In countries, governments often do this. India fears the impact of rising petrol prices on low income consumers and so subsidies petrol prices. The UK government levies one of the higher tax rates on petrol, and there will be many calls for some planned tax rises to be dropped. But, these temporary measures don't alter the long term changes on supply and demand of oil.
Impact Of Higher Oil Prices:
- Increase the feasibility and profitability of alternative fuels. There are many alternative energy sources (hydrogen, solar panel, green electricity) in development. Higher petrol prices just make them more attractive and increase investment.
- Encourage consumers to choose more fuel efficient cars. Remember the 1960s, when cars used to do 5 miles to the gallon? These days, some of the best performing cars like the Honda hybrid can do up to 85 miles to the gallon.(fuel economy)
- Encourage other forms of transport such as walking, cycling, public transport.(perhaps a healthier population)
- Encourage more fuel efficient driving. e.g. drivers avoiding speeds of 80mph+ on motorway.
- By encouraging other forms of energy, we become less dependent on oil and oil producing countries. Developing renewable forms of energy will erode the dependence on particular geo-political areas.
Oil is such an important commodity, it has an undoubted impact on politics. Controlling oil supplies or maintaining oil supplies has influenced foreign policy often in an undesirable way.. If this dependence on oil is reduced, it will avoid placing so much political and economic power in the those who seek to stablise and control oil production.
Rising long run oil prices is a response to the fact it is a non-renewable energy. Oil is destined to run out. With economic growth in China and India, the rate of oil use is increasing rapidly. It is an inevitability we have to find alternative sources of power. If we try to distort market forces, it will only delay the inevitable.