The cost of the status quo

We keep being told how much it will cost us to leave fossil fuels behind. Here’s a little story about how much it will cost us to remain hooked:

“According to normal economic theory, and the history of oil, rising prices have two major effects,” said Fatih Birol, the chief economist at the International Energy Agency, which advises industrialized countries. “They reduce demand and they induce oil supplies. Not this time.”

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“What is disturbing here is that things seem to get worse, not better,” an analyst at Goldman Sachs, David Greely, said. “These high prices are not attracting meaningful new supplies.”

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The outlook for oil supplies “signals a period of unprecedented scarcity,” an analyst at CIBC World Markets, Jeff Rubin, said last week.

Oil prices might reach more than $200 by 2012, he said, a level that would probably mean $7-a-gallon gasoline in the United States.