By Ali Hussain

The following article comprises comments by oil consultant Dr Hussain (alihussain27@gmail.com) on the article ‘Oil Price Reaction To Middle East Turmoil Is Unjustified And Dangerous’ by Nordine Ait-Laousine and John Gault (MEES, 7 March).

The article states that the recent increase in oil prices is unjustified and dangerous, without giving any justification or explanation of how and why this would happen. Prior to arriving at such conclusions scientific research must be done to estimate the effects of higher oil prices on inflation and the GDPs of OECD, EU, Southeast Asian countries and so on. Without such a study any talk of “unjustified and dangerous” higher oil prices is certainly unacceptable.

In addition to the above the article ignores the following facts:

● Taking any previous year as a base, the real price of OPEC oil now is much less than the current nominal price of around $100/B due to the drastic decline in the value of the dollar vis-à-vis other major currencies and imported inflation.

● In some OECD countries the price of some oil products to the final consumers contains more than 70% taxation.

● Higher oil prices encourage the efficiency of using oil and the expansion of alternative sources of energy.

● Global oil is limited in quantity and with a big increase in oil consumption due to ‘cheap oil’, oil reserves will be depleted more rapidly and the theory of ‘peak oil’ will be more of a reality.

● Major oil exporters rely heavily on oil revenues and yet at the same time for them every single barrel they produce is a big sacrifice, because once their reserves are depleted they will not be able to replace them.

● From 2005 to 2030, it is estimated globally there will be big financial requirements for oil and gas exploration, which will reach a total of $12.7 trillion.