The World from Berlin 'Oil Prices Are Still Too Cheap'

What does $100-a-barrel oil mean? No one is entirely sure. But this week's new high has economists, pundits and politicians vigorously speculating on the impact on the world economy. German commentators, though, are more concerned about the environment.

Traders working the crude pit at the New York Mercantile Exchange.

Traders working the crude pit at the New York Mercantile Exchange.

One hundred dollars is a lot to pay for a barrel of oil. But with the symbolic mark hit initially on Wednesday and then again on Thursday, it is time, analysts say, to get used to three-digit dollar prices for a barrel of the black stuff.

Not only that, but many say more hefty price increases are on their way. Nobuo Tanaka of the International Energy Agency forecasts $150 a barrel by 2030, while Claudia Kempfert of the DIW German Institute for Economic Research says that by 2020, $200 a barrel is possible.

In the short term, however, prices will likely initially ease. Many analysts say that once winter loosens its grip on the Northern Hemisphere, prices will slide back to $80 or $85 a barrel, or even less. On Friday, a barrel of light, sweet crude was going for under $99 a barrel, after peaking at $100.09 on Thursday.

How long will the bumpy ride continue? Some answers may come when OPEC meets on Feb. 1 to decide on spring production levels. Indonesian officials are expected to request that OPEC increase production in order to curb price increases, Dow Jones reported on Thursday. But with prices likely to have stabilized by then, few analysts are holding their breaths.

But maybe expensive oil isn't such a bad thing after all. German commentators on Friday say it will motivate investors to look toward alternative technologies and push politicians toward tougher environmental policies.

The left-leaning Berliner Zeitung writes:

"As opposed to the oil crisis of 30 years ago, there are not just one, but two strong reasons to move away from oil and to reduce energy use: the geopolitical danger that is created in the competition for oil reserves, and the climatic effects of burning fossil fuels. Everyone knows about the greenhouse effect. The geopolitical situation intensifies the oil shortage: Russia's new power pretensions would be impossible without its power instruments of oil and natural gas. Things would be more peaceful in Iraq, Iran, or Darfur if the regions were not sitting on oil."

"Europe should think about how it wants to spend its money in the coming years. Some of the money that we're paying in ever increasing amounts to oil producers, indeed will come back in some form. But nothing is won strategically, and not everyone wants to see increasing control of our industries put in the hands of oil suppliers and their investments. Instead of a slow adjustment to oil prices, this opportunity could be used for the foundation of a new European energy policy. Whatever we invest in alternative energy and energy-saving technology today, we'll get back through savings and exports in the future."

The business daily Handelsblatt writes:

"But how bad is the three-digit oil price, really? Shouldn't we actually be welcoming it? If Europe takes environmental protection seriously, then fossil fuels must become more expensive so there's more of an appeal to invest in energy-saving technologies and renewable energy sources. And if the effects of the price increase are greater in the US than they are under more pressure to curb energy wastefulness. China and India, too, will feel the economic need to promote further energy efficiency."

"Expensive oil can help governments to push through environmental protection policies. They should use the opportunity to develop a strategy away from oil. Instead of transferring more money year after year to oil-exporting countries, they should be investing in the development of alternative-fuel burning engines and energy-saving technologies. Seen this way, oil prices are really still too cheap."

The Financial Times Deutschland writes:

"Why will the oil price sink in the short term? First, because the credit crisis is not going anywhere. The US economy will continue to slow down, which dampens demand. Second, China will also be affected, and the country is responsible for a third of demand growth. In October 2007 the government raised the price of oil and gas by 10 percent. The next step is sure to come, which will result in shrinking usage. Third, Saudi Arabia, Angola and Nigeria are pumping like crazy -- and they have the supply to do it. And fourth: there is no reason to believe that Exxon, Mobil and Shell are interested in becoming a display in Madam Tussauds museum, in London. Now that would be alarming."

-- R.Jay Magill, Jr.; 1:30 CET


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