Good question

\”A supply crunch appears likely around 2013 … given recent price experience, a spike in excess of $200 per barrel is not infeasible\”.

What effect would a barrel price of $200 have on industrial economies, should that spike be sustained for any length of time? We would witness endemic global market disruption, reductions in agricultural yield, increased transport costs for both finished goods and raw materials (true pessimists would add an oil war or two for good measure). The shockwaves would be felt everywhere, although as ever, the poor will take the brunt of it.

And yet when the price of oil shoots up, we use less – meaning we output less CO2. So let me rephrase my question: what effect would a barrel price of $200 have on the CO2 output of nations? It would certainly force a substantial reduction. It would be violent change, but that is the price of hubris. The longer we wait, the greater the cost when we finally act, when everything is rushed because the public furore can no longer be ignored. Remember the fuel protests? The UK ground to a halt in a matter of days at the behest of a few thousand protestors. Scale that up by an order of magnitude and you can see what a $200-an-oil-barrel world might look like, at least until we got used to it.

Personally I\’d say the effect wouldn\’t be all that much in the UK. We might drive a little more, have a little more money in our pockets, but $200 a barrel oil wouldn\’t make that much difference.

For oil in the UK is currently at $300 a barrel.

160 litres to a barrel, £1.17 to the litre, $293 a barrel.

So, what would be the effect of peak oil?

Not a lot really.

8 thoughts on “Good question”

  1. Oil isn’t £1.17 a litre. Highly refined hydrocarbons made from oil is.

    Wasn’t it you telling us that the price of Scandium had little to do with the price of Scandium-bearing ore?

  2. Brent Crude =/= Gasoline

    And as Brent crude is the standard (which is what I assume the graun is talking about) what you’re saying doesn’t make any sense.

    What would be the effect of peak oil on petrol prices, more expensive input, a refining process which is more expensive (because energy among other things would be more expensive), taxes which are already set high and unlikely to come down? Ultimately, even more expensive petrol.

  3. Brian, follower of Deornoth

    I think, Left, that the point Tim is making is that we needn’t have more expensive petrol even if the price of oil does reach $300 per barrel; the high price of petrol in Britain is pure home-grown idiocy.

    All we need to fix the problem are a few spending cuts (actual, real spending cuts not the pretend ones promised by the Government).

  4. It’s obvious that the last oil spike was far less disruptive to the UK compared to the US since we have already adapted to hellishly expensive petrol. So Tim is correct in sentiment (pendantry notwithstanding).

  5. If crude went up in price we would still be paying more. The tax is still there. It WILL mean that the UK will do fewer journeys as our petrol goes up past £3/l. We have the highest percentage of tax on petrol in the world. When crude goes up in price we will still have the highest tax on fuel.

  6. I don’t know how much it costs to turn a barrel of Brent Crude into a barrel of Petrol sitting on a forecourt, it is probably less than $100, but I’m not sure what point Tim was making. Pedantry seems entirely appropriate, especially given that its Tim and its almost a sport to him.

    Petrol taxes seem about high enough in the UK from a CO2 point of view. Obviously I’d prefer it was scrapped and replaced with an across the board carbon tax, but beggars can’t be choosers.

  7. I rather suspect the point is that if the price rises are significant enough to destabilise our economy, all our government has to do is cut the tax a little…

    There’s a lot of room for cuts, with over 60% of the money spent on petrol currently going towards the government’s pockets.

    If oil prices double, they could cut the tax so that petrol prices would remain the same. Sure, they’d have to find a little more money elsewhere, but that’s doable. It would require our government to consider what’s best for the country though, rather than what’s best for them – so it’s unlikely…

  8. …….I don’t know how much it costs to turn a barrel of Brent Crude into a barrel of Petrol sitting on a forecourt, it is probably less than $100…….

    Refining expenses = $3-6 per barrel depending on refinery configurations.

    The impact of $200 a barrel would be real enough, but far greater on countries with lower taxes on fuel, eg USA, China and the Middle east.

    The impact on consumption in those countries would be huge, bringing the price back down again.

    Iran would go bankrupt, as the cost of their subsidies exceeds the profit they make from exporting oil.

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