ISAS Briefs

Oil is now traded at nearly US$140 a barrel.1 The real price of oil is already at an all-time high.2 Goldman Sachs, the United States-based investment bank, which correctly predicted three years ago that the oil prices would exceed US$100, has recently forecasted that US$200 a barrel could be a reality in the not-too-distant future.3 A 170 percent price hike4 over a three-year period (from US$47 a barrel in May 2005 to US$127 May 2008) and, more importantly, a relentless rise in fuel prices has resulted in the current scenario being termed “the third oil shock”.5 This is certainly true from the perspective of the least developed countries. The term was, in fact, used by Gordon Brown, the British Prime Minster, who, in a recent article, stated that the global economy is facing the “third great oil shock” of recent decades.6 The Economist has dubbed the phenomenon a “slow-motion oil shock”. Worse still, Joseph Stiglitz, economics Nobel laureate, is concerned that oil is underpriced relative to the cost of carbon emissions.7 Apparently, the price of the black gold will continue to swell until it finds equilibrium where alternative energy becomes viable.