Logic and the Oil Future: A Modern Survey

The purpose of this contribution is to expand on the comments made about oil in my article “An uninvited rejoinder to climate warming skeptics” (Banks, 2005). Amazingly enough, with the oil price occasionally touching sixty dollars per barrel (= $60/b), there are still observers who are willing to entertain arguments that in reality the recent escalation in the price of oil is an artificial phenomenon brought about by, e.g., the behavior of Organization of Petroleum Exporting Countries (OPEC), rather than a natural consequence of economic and geological circumstances. As alluded to in the sequel, even a superficial examination should make it clear that OPEC has never tried to “regulate” the market in a conflicting manner. There are also some misunderstandings about the nature of the volatility of oil prices that deserve a more thorough algebraic treatment than provided in my energy economics textbook (Banks, 2000). Finally, a short discussion is offered about the macroeconomic and financial market implications of higher oil (and energy) prices.

Keywords:

• reserve-production ratio
• deposit pressure
• Hubbert's peak

Acknowledgments

First part of lectures given at the Royal Institute of Technology, Stockholm Sweden. I would like to thank those persons who commented on a previous version of this article, and also my article An Uninvited Rejoinder to Climate Warming Skeptics. Comments on this article are welcome, and the author can be reached at [email protected]