"Energy Perspectives or Confessions of a Dangerous Mind"
Has the world entered a new energy paradigm since 2000, one where energy prices will be on an upward trajectory? Record-setting oil and natural gas prices and reports on China's growing energy appetite have led many analysts to answer in the affirmative. However, the relationships that affect energy prices are complex. A declining surplus is often observed in resource economics, because the big, low cost reserves are usually found and depleted first. As reserves become smaller, technology has a tendency to reduce finding costs. Increasing scarcity also encourages end users to seek out alternatives or devise more efficient processes. These forces tend to cap price increases. Of course the process is lumpy, which leads to price cycles. As for the current energy price cycle, the near term choke point is likely to be demand. At what price will demand and economic growth be curbed? If history is a guide it might be sooner than later.