Massive Wealth Shift to Oil Producing Countries & Oil Companies

The Washington Post has an article dated November 10, 2007 about the effects of the rise in oil prices over the last five years. The article points out that the rise in oil prices has been responsible for one of the largest transfers of wealth in the history of the world. The increase in oil prices means that consumers are paying four to five billion a day more to oil producers than they did five years ago.

The thing that is different about this run-up in oil prices is that it is not production driven but supply driven. What that means is that in the past oil prices went up because of efforts by oil producers to control production. This increase is being caused by increases in demand which increases the cost of the world's supply of oil.

This increase in demand is coming from the rapid growth of the Chinese and Indian economies. Since both nations are experiencing rapid economic growth that is projected to continue for the foreseeable future, demand for oil will only go up. This means that high prices will continue for the foreseeable future.

It is past time for the U.S. to get serious about conserving energy and cutting back on our use of oil. The U.S. consumes about 25% of the world's oil, but we are only about 5% of the world's population. Our propensity to burn gasoline is making Saudi princes even richer than they were and is helping countries like Iran gain influence.

The choice is clear: we can continue to use oil at the rate we have and watch oil producers and oil companies grow even richer or we can get serious about cutting back on our oil consumption.