What to do with the oil???

16Jun08

When prices go up, better say, rush up, people would stop buying so much, would look for alternatives …

But in the case of oil prices, everyone keeps being stubborn! People cannot live without cars, cars eat up oil! Oil reached today $140 !!! (FT.com, June 16 2008, Oil hits new record near $140)

The G8 encourage alternative energies, people look up as if that’s surreal .. still.
The FT say that the oil prices went up because of the recent dollar weakening. The oil giants are reaping up the profits, they have the power to hold up the buyers and all the others.

The possibility of the Saudis increasing the output brings up the possibility of better days.. but that’s just a possibility. In business theory the hold-up problem is a tactic employed for the benefit of those employing it obviously.

“Saudi Arabia may soon have the capacity to pump more oil. But how much the country will chose to bring to the market remains unclear.” (FT.com, article mentioned above)

This reminds me of Porter’s water and diamonds paradox. We cannot live without water, but water is free or .. very cheap. Whereas diamonds are expensive, even though we can surely live without them. I think oil has now become the diamonds nowadays. Major oil suppliers act the way South Africa has been doing with diamonds. Shortages (as mentioned in Co-opetition, by Brandenburger and Nalebuff) help add value…

Still, some people might argue that oil is very dependable, in some terms like water …
Even if I might be inclined to tip the balance in favor of both sides, almost asserting the fact that oil is in some ways like water and in some ways like diamonds, this time I stand strongly by my own side: it’s just the diamond way of shortening supply that makes everyone so crazy on focusing on the issue of world economics and political alliances, instead of conscientiously developing and improving the alternative ways to oil.

So what do we do next? What do we do with the oil?
What is your opinion?

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