Kent Bush: Oil by the barrel touches $100

Some may say I'm too young to long for the good old days.

But when you realize that it was less than 10 years ago - December 1998 - a barrel of oil was trading for $11, it doesn't seem so absurd.

Oil touched $100 a barrel for the first time Wednesday before closing at $99.62.

Just the thought of $100 a barrel oil made stockbrokers sound like Chicken Little. The sky is not, in fact, falling. But the ceiling is getting lower.

In 1980, prices were under $30 a barrel. But the prices would have been in the $100 range in 2008 dollars.

Now the price is $100 nominally and in reality.

For years, oil lagged behind other prices.

It was April 1983 before oil futures crossed the $30 mark. It took seven more years to cross $40 in October 1990. It took another 14 years to make it over the $50 mark.

But from Oct. 1, 2004, oil futures have risen past $60 (June 2005), $70 (April 2006), $80 (September 2007) and $90 (October 2007). It still hasn't closed above $100, but it won't be long.

Obviously, the accelerated rise is due, in part, to the fact that $80 to $90 is only a 12.5 percent increase where $30 to $40 is 33.3 percent.

But the fact is that geopolitical problems due to the war on terror, Nigerian warlords, and squabbles among former Soviet countries are having a major impact on the fragile supply and demand economics of oil futures.

The falling value of the dollar is also leading to a de facto price increase for all commodities.

India and China are third world countries that have been rapidly developing. This development is leading to a significant increase in oil demand for industry and personal use.

The supply side is having trouble keeping up. No new dinosaurs are dying and allowing their immense corpses to putrefy into pools of black gold.

OPEC could increase production from current supplies, but they aren't overly concerned about high prices.

The only thing that will lead to a decline in price is a decline in demand. When the price gets too high for people to handle, demand will fall and supply will catch up. Then, and only then, will the price come down.

There is still room - even in our fragile economy - for the prices to trend upward before it becomes unbearable. But with some economic indicators pointing toward the possibility of a recession, it is hard to imagine that ceiling being much higher.

It is at these times that supporting our local economy becomes even more important.

Money circulated within an economy increases the value of each transaction by fueling the next transaction.

Shopping locally will help make the local economy more recession proof and help us all thrive in good times and bad.

Augusta Gazette