Qatar’s energy minister said crude oil prices, which have surged recently to record levels above 80 dollars a barrel, should be more than 100 dollars.
“If we take into account inflation from 1972 to the present day, the real and fair price for oil should be more than 100 dollars,” Abdullah bin Hamad Al-Attiyah said in remarks aired by Al-Jazeera television on Tuesday.
What’s fair in somebody’s eyes has no bearing on what will be. Whether prices will rise to such levels has to do with whether the Chinese and Indian economies stick to their free market principles that have brought them so much economic growth and whether OPEC has run about against a capacity constraint.
Just consider, to put it another way, in the 35 years since 1972 the price of oil has not have changed much in real terms _and_ we have experienced so much economic growth over the same time period. Over much of that period the real oil price fell.
Ask yourselves: what have the Arabs done with the trillions of western money pumped into their fiefdoms in return for the hydrocarbons they neither found nor extracted but simply sat on?
Then look at the low level of literacy among them and their dependence on foreigners to do the most basic things for them, while they set up dark age madrassas across Africa and Pakistan.
Gordian, it depends, of course, where you are looking. A glance at Qatar and Abu Dhabi and, for that matter, Kuwait, shows wise investment and massive economic growth (scratch the surface and you will find a US company near you, or one that you patronise, in which the Kuwait Pension Fund has enormous investments). Saudi Arabia has tried to diversify. Here, however, as in most Muslim countries, we run up against a fundamental problem: (1) prosperity requires free markets; (2) free markets cannot operate properly without freedom of expression including accountability. Before anyone cites China at me, let me say that economists are wondering whether China can make the leap from a skills-based economy, which is basically built on cheap labour, to a knowledge-based economy, which is what typifies the prosperous West today.
Terry,
Free markes simply require recognition of rights in property. It is a peculiarly American delusion that free markets require recognition of the right of free expression and democracy. Business did fine in fascist Chile and Spain, as it does in the gerontocracy of China. Singapore is another example of a rather authoritarian society with a prosperous economy.
Balogna.
Mafish mushkila (Arabic for no problem). If oil gets to this price, we have an unlimited supply, as many alternative sources of energy and other sources of oil become economically viable. It’s just going to cost a little more to drive your SUV.
Bob,
I thought it was “Salami”
All we need to do is open Anwr and the Gulf of Mexico to drilling. Then we will have quite a supply in reserves. Oh, and build a few more refineries, too.
Whenever I hear the word “fair” mentioned in either a political or an economic context, I am immediately deafened by the sound of my teeth grinding.