high oil price

i have just finished reading the article in Newsweek. Previously, we just hear that the oil price keep increasing, but we, at least me have never expected that the price will go up so high. OPEC president Chakib Khelil predtcts that the oil price will be up to $200 by 2010. The first question comes into my mind is that why the oil price keeps increase without stop?

of course, as we all know that oil is one kind of natural resources. It will face the problem of scarcity. Thus, due to limited resources, the demand of oil is very price inelastic. Also, more and more developing countries like India and China are focusing on industrial development now, the demand of oil also increase rapidly. As a result, the oil-rich countries in the Middle East can just raise the price of the oil without losing any customer but making much more profits at the same time.

However, the high oil price also brings many problems and changes around the world. Here are some examples. Developed countries like USA will turn to use alternative energies. Small fuel-efficient cars are getting popular among the Americans. On the other hand, the energy price is the main reason causing the food price inflation as energy is required during the food production process. I think so far, the poor people have showed their unhappiness to the issue of high food price by riots. I am afraid that if this situation does not get improved or keep getting worse, the problem of social unrest will also be worsened.

Besides the problem of food price, another effect i found interesting in the article is that the author thinks regionalisation will replace globalisation in the future. Due to the high oil price, the transport fee will also increase a lot. Thus, many developing countries like China will not be willing to transport goods to America any more because of high transport cost. Instead, China will be more looking at its neighbour countries like Japan which is much nearer than USA. As a result, there will be more regional business and development and the world may not continue to be flat any more. Wealth and benefits will also become difficult to share all around the world.

p.s. i do not manage to upload the article here...so sad:(

yingwei:)