[The world growth number is the interesting addition to the argument -- I didn't realize it had increased so enormously.]
http://krugman.blogs.nytimes.com/2008/04/15/oil-numbers/
April 15, 2008, 9:02 pm
Krugman NYT blog
Oil numbers
There are two basic facts that would seem to explain a lot about
what's happening to oil prices.
First, Gross World Product growth has accelerated -- from 2.9
percent in the 90s to almost 5 percent in recent years, according to
the IMF. All of this is because of growth in emerging economies,
largely China.
Second, world oil production has stalled -- after growing around
1.6% a year in the 90s, it's been basically flat for the last three
years.
So we've got rapidly growing demand due to industrialization in Asia
colliding with stagnant supply, basically because oil is getting
hard to find. (The demand shock is probably even bigger than the GDP
number suggests, because China's economy is highly
energy-inefficient).
And the demand for oil is price-inelastic -- that is, it takes big
price increases to persuade people to use significantly less.
There's probably more to the story, but that seems to be the basic
thrust. And it seems to be a recipe for rising prices for a long
time to come.
This is what peak oil is supposed to look like -- not Oh My God
We've Just Run Out Of Oil, but steady pressure on the economy and
the way we live from rising energy prices and their consequences.
And it doesn't matter much whether we're literally at the peak, or
whether production can rise by a few million more barrels a day;
unless there are big sources of oil out there, we'll be feeling
peakish for the foreseeable future.