Converting Magazine

Mark Spaulding

Why the price of oil will stay high
January 18, 2008

No, it's not because there isn't enough of it in the ground. The "scarcity excuse" is simple and easy for most people to understand, but it's a lot more complicated than that.

On Jan. 2, the price of oil broke the $100-a-barrel mark (albeit briefly) for the first time. And the idea that the rapidly-expanding economies of China, India and elsewhere are driving demand makes it somewhat reasonable to expect the price of oil should go up. But nearly twice as high as only a year ago?

Here are two more explanations: 

Twenty years ago, the oil companies cut back investments in rigs and other things related to finding new oil deposits. And it is just those new deposits that when found are discovered in more and more inaccessible places. That's more expensive. 

Oil-rich countries are clamoring for a larger share of the profits while simultaneously discouraging private investment. That's more expensive, too.

Now, I'm no fan of the oil companies. Nor do I appreciate paying $3 a gallon for gas. But as the price of oil and all its petroleum derivatives for plastics, adhesives, coatings and inks (as well as for transportation) has a daily impact on your converting and package-printing business, it does help to have a better idea why that price is likely to stay high.

Posted by Mark Spaulding on January 18, 2008 | Comments (0)