If oil is a dinosaur, why is the price so high?
For years now, the consensus has been that oil is on its way out and renewables are in. Yet, the price of oil continues to rise. Oil is currently trading at a 7 year high.
Is demand for oil still growing, or is supply dwindling, or a combination of the two? The latest price hikes have resulted from inflation data and concern that the Ukraine crisis might disrupt energy markets, shortening supply. Concerns over supply are responsible for most of the recent growth in the oil price.
From COVID to wars to geopolitical threats, concern over supply keeps pushing the price up. The market isn’t worried that we will run out of oil but rather that disruption to distribution channels will choke supply.
In addition, despite many first world countries slowly switching to renewables, there is enough of a push from the rest of the world to keep demand growing. With demand going up and supply questionable, prices rise.
Our energy requirements will change, even if we don’t see it happening. As an oil tycoon once said, we didn’t switch to combustion because we ran out of horses.