At the start of a week when fuel protestors threaten to bring the streets of Manchester to a grinding halt - local accountants say the increases are inevitable.
We all know that the price of oil has soared, and other energy sources such as gas and electricity prices have also rocketed. Yes the Government could reduce the tax on fuel, or take measures to boost availablity and hence reduce prices - however these measures can only give temporary respite. I can understand the fuel protestors’ frustration, but they might as well try to hold back the tide!
The fact is that there is a fixed quantity of fossil fuel in the Earth and an ever growing rate of use (or
depletion). The laws of supply and demand must come into operation……….. prices will go skywards. It is absolutely inevitable that fuel prices will rise, and what we have seen so far is merely the beginning!
The ever growing rate of usage has spurted in recent years with the economic growth of countries such as China and India. In 1990 the OECD countries (which represent the Worlds richest nations) consumed 57% of the World’s energy usage. Today this has been turned on its head, Russia, China and India together with other Far Eastern developing countries now consume more oil than the USA. China’s oil consumption is growing at 7.5% per annum and India’s grows at 5.5%. By 2025 the World’s demand for oil is predicted to be 60% higher than it is today.
The Chinese plan to build 36 power stations in the next 12 months? There is rapid growth in car production
and ownership in China. If everyone in China had the same car ownership ratio as the USA has, the World would use a ridiculous amount of oil each day - approaching what it currently uses in a whole year!.
Obviously that is not going to happen; its an impossibility.
Currently 10 oil rich countries - Saudi Arabia, Iran, Iraq, Kuwait, the UAE, Venezuela, Russia, Libya,
Kazakhstan and Nigeria control 82% of the World’s oil reserves and 3 - Russia, Iran and Qatar hold 56% of the World’s natural gas reserves. (These are ‘proven’ resouces, there will of course be undiscovered resources - but these are dwindling.)
What is the value of a crystal ball? Knowledge of the future is valuable for business owners and investors. This could for example mean taking advantage of fixed priced fuel contracts, investing in fuel efficient machinery or choosing good stock market investments.
- Energy prices are going to continue to soar, no doubt about it.
- The ‘economic’ or monetary value of the resources held within just those handful of countries is mind blowing. At current prices the annual oil revenues are over $970 billion, and of course as prices rise this will increase.
- As fossil fuel prices rise, so the benefits of ‘fuel efficient’ technolgy and renewable energy sources become increasingly economically viable.
