I refer to the Malaysiakini article Oil's talismanic role in the global economy .
Based on his series of facts - that oil supplies are diminishing and demand unabated, it is hard to see how the writer could then conclude that this is a case of market failure and oil should not be dictated by the free market.
The writer brought up the example of China, a fast growing importer of oil. China is a clear case for the markets: Chinese consumers and industry have been shielded from the market, though now less so than before, with a system of price controls and subsidies.
Chinese consumption of the fossil fuel would have been much lower had Chinese consumers paid market prices for their petrol and diesel.
As supply become tight, demand does not go down in countries such as China, India and Indonesia because of government intervention. Indeed, we ought to move to cleaner, environmentally sustainable and renewable energy sources.
Green energy sources become more feasible and more likely to catch on when prices of oil remains astronomical. In a sense, it is good that Australians face a future of AU$2/litre petrol, as it would make green alternatives a lot more attractive and viable.
The writer’s idea of peak oil seems rather flawed. Oil supply will not drop drastically due to depletion.
Oil fields will deplete themselves one by one and with fewer and fewer viable oil sources becoming available, supply will drop gradually, allowing the price to increase in tandem.
It won't be a case of an insatiable world suddenly finding itself one morning with oil wells dried up after draining its reserves on a wild party the night before.
Lastly, the writer railed about the power the free market gives to the oil-rich Opec states.
Quite on the contrary, suspending the market further in this economic sector would grant even more power to oil-producing states.
Instead of the price mechanism, such states will be rationing oil, allowing them to not only amass economic power, but substantial political power as well.
The writer not only misses the problem here - the lack of free market - but his solution would also intensify one of the problems he stated.
