The price of oil is rising once again. Demand is increasing to record levels in China as the U.S. appetite for oil is growing again, too. Reserves are dropping as well. So crude oil is now selling at more than $73 a barrel, a record for all of 2009.
Moreover, since there has been little change in the way oil is produced, traded or regulated, there is no reason speculators cannot keep oil moving up to the record $147 a barrel that it hit in July of 2008, barely a year ago. In fact, some warn oil prices won’t stop there this time.
A troubling question immediately comes to mind: will the effects of such high oil prices once again send the world’s economies into even deeper recessions than they are currently in? The timing is terrible. Western economies are just now showing signs of recovering.
Next tough question: will these higher oil prices then plunge back down to the $40 a barrel they were in December of 2008 because economies have tanked as a result of the higher oil prices? It’s a vicious circle.
The latest run-up in oil prices is prompting a debate over the various economic theories that purport to explain its pricing. How U.S. regulators and politicians interpret these theories is key to establishing more effective policies than we have used in the past. Many critics of our lack of a coherent energy policy argue that we haven’t learned from previous mistakes; that we must now have an energy policy that takes back control of our economy and our security from hostile nations. (Click here for the history of U.S. energy policy and its ongoing failure to cut down on oil imports.)