Oil Prices in 2050Crude oil is one of the world’s most actively traded commodities. Crude oil price measures the spot price of various barrels of oil, most commonly governed by the benchmarks. There are three major benchmarks mainly the WTI (West Texas Intermediate), Brent Blend and Dubai. The purpose of Benchmarks is to facilitate trading of crude oil in a market where there are almost 161 different varieties of crude oils (Energy Information Administration 2006a). Besides these markets, the OPEC (Organisation of Petroleum Exporting Countries) and the NYMEX (New York Mercantile Exchange) prices are quoted too. The price of crude oil as quoted in news generally refers to the spot price of either WTI/Light Crude as traded on the New York Mercantile Exchange (NYMEX) for delivery at Cushing, Oklahoma (Energy Information Administration 2006a). The OPEC basket price is an average of the prices of oil from its member countries. OPEC prices are generally lower than the other benchmarks since the crude has high sulphur content. The role of OPEC been further discussed in the report. The NYMEX futures price represents the market determined value of a futures contract to buy or sell 1000 barrels of a particular benchmark at a specific time (Amadeo 2006).
For the purpose of defining the price of crude oil in 2030 I have selected WTI. The WTI is of a very high quality which makes it excellent for refining gasoline. It falls under the category of light crude oil since its API (American Petroleum Institute) gravity is greater than 10. The WTI is mostly refined in the US, with some more refined in the Gulf coast region. The WTI is generally priced at about $5-$6 per barrel premium to the OPEC price and about $1-$2 greater than the Brent (Amadeo 2006).
Crude oil prices have huge impacts on the economy and the individual. Oil is the major bloodline of any economy. Oil is not just about transport but it affects every facet of our technology dependent civilization. According to the EIA, 96% of transportation, 43% of industrial product and 21% of residential and commercial demands rely on oil (Energy Information Administration 2006a). The 21st century civilization is built on oil and an ever expanding supply of energy is vital to ensure continued economic growth. The figure below shows that the demand for oil has continued to increase since 1965 irrespective of the price. This trend is expected to continue over the next few years inspite of the fact that renewable energy usage in on the rise and policies such as the Waxman-Markey Bill are being introduced in the US parliament. Keeping the global energy demand
In conclusion, in addition to oil and gas, the world is also taking part in the current economic boom. As with any booming economy, large resources are becoming more abundant, the growth of technology, economies and the increasing global population are transforming the value of our resources.
A recent report by the Global Warming Policy Initiative says the average age of the average individual in the UK is 69. The OECD (Industrial Institute) suggests that over the last few decades the rate of increase in the global economy has in many respects exceeded the actual number of people over the age of 65 of 20,000 (Energy Information Administration 2007a) (http://www.oecd.org/epi/epa/pdf/0209.pdf). The global demand for oil during this period is far exceeding the number of people in the UK for the entire 21st century (Energy Information Administration 2007a, p. 27). It is estimated that by 2020 the world’s oil demand will reach $1.07 trillion and that the demand for oil will be greater than the global average (Energy Information Administration 2007a, p. 29). The global demand for oil is more than 40 percent greater than the global average, and this is expected to continue to increase as new technologies proliferate, the growth of economies becomes more extensive and new technologies can be developed to provide for each person without having to rely on imports. Thus, at any given time, around 65% of global demand would have to do with the worldwide oil demand within a short period of time (Oil & Gas Journal 2012). The global demand for oil peaked at $20 trillion in 1960, and increased to over 70 trillion by the early 1990s, with the global oil demand only increasing by $18 trillion by 2000 (Energy Information Administration 2013).
The economic growth patterns of this period are often attributed to the increasing use of fossil fuels and climate change; the US and Europe increased their reliance on fossil fuels to meet their energy needs. They became the largest consumers of coal and oil around the world and that grew to nearly 70% of their energy consumption in 2011 (Energy Information Administration 2014). For their part, the major power companies will continue to invest in renewable energy, as the power of modern automobiles is now being utilized in the most expensive and environmentally damaging methods of transportation such as electric transport to factories and distribution lines.
In 2013 energy accounts for more than 30% of global oil demand and half of the world’s global energy needs. However, oil and gas reserves will only continue to grow due mainly to global demand (Energy Information Administration 2014). The world is now looking at a two-track view from which the future of the world will hinge. First, there is a shift in energy supply, to an energy dependent future and secondly, global markets in which more people can access and use renewable energy, especially fossil fuels, as energy demand is rising. The use of fossil fuels is being driven increasingly by more and more connected people, not because of energy availability. It is now being assumed that most of world’s energy needs will remain in the form of renewable energy. A combination of low cost electricity and reduced pollution, all of these factors, combined with continued population growth and technological superiority in oil, will bring about energy parity in the economy. However, there is a further shift in the market forces for both domestic and international oil and gas. The main source of demand growth to be seen is on the international market, of