Crude oil is an exhaustible resource as we are well aware of in Kathmandu. Unfortunately, the oil that we use to fuel our vehicles will one day cost us much more dearly than the exuberant prices we already pay. Looking through the latest Newsweek or the economist, one gets the impression that major oil companies such as Shell and BP have suddenly gone “green” and investing millions to make energy production less harmful and away from crude oil. One of the theories propagated by these non-OPEC based oil companies is that oil demand throughout the world is slowly on the decline.  

During the global crisis in 2005-2008, one of the theories that became main-stream was that of “peak oil”. The peak oil theory is based on the assumption that supply of oil had reached its production capacity and that any demand increase would necessarily have to met with rising prices. While OPEC which has a monopoly on supply was more than happy silently agreeing with the notion to help prices increase, companies belonging to OECD went on a marketing spree to debunk this myth. One of the main factors being that confidence in the supply of oil is crucial not only to the stock prices of these countries, but there is government vested interest in it as well. The auto industry is one of the main export businesses of OECD countries and experiences with high oil prices have shown that the auto industry is hard hit by the notion that oil supply is in trouble.

Oil and auto industries, as well as the down-stream industries that depend on oil, are major companies that employ millions of workers and are worth billions of dollars. Any supply fears will seriously affect business and employment. The end game of these companies along with the politicians that they finance is to show consumers that a steady supply of oil is not a problem and therefore we can continue to burn and consume the way we do. Unfortunately, empirical data shows that oil demand is set to increase exponentially and the structural supply problems, such as crisis in the middle-east, show that the high price is a result of supply issues. Oil companies and governments which support them are choosing to willfully remain ignorant and mislead the consumer based on short term benefits. While this may lead to stability and profits in the short run, this sets a recipe for further catastrophe due to a lack of incentive to switch away from heavy oil reliance. Rather than siding with the oil companies, governments need to be more responsible and look at the long term by encouraging efficiency and alternative energy which is probably the only way to suppress demand so that oil prices are stable and low enough to foster growth in all industries.