A rational reason for high oil prices

Posted on 04/08/2012 | 1 Comment

 

"There is no rational reason for high oil prices," writes Ali Naimi, Saudi Arabian Minister of Petroleum and Mineral Resources, in today’s Financial Times. Well, I can think of one– if oil prices were lower, the world would want to consume more than is currently being produced.

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Blue line: total world oil production, millions of barrels per day, annually, 2002 to 2011. Red line: global oil production in 2002 times (yt/y2002)0.75 where yt denotes global world GDP in year t as reported by IMF. 2011 world GDP growth estimated at 3.9%.

world_oil_gdp_mar_12.gif

The question is not whether there is a rational reason for high oil prices, but rather whether there is a rational reason the world is not producing 100 million b/d today. And if anyone knows the answer to that question, it should be Saudi Oil Minister Ali Naimi.

A rational reason for high oil prices
James Hamilton
Wed, 28 Mar 2012 19:02:47 GMT

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One response to “A rational reason for high oil prices”

  1. aFrankAngle | 04/08/2012 at 5:22 pm | Reply

    Thanks for the good info!

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