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Everyone is saying that oil prices are increasing now, because there is a huge demand for oil comming from developing countries such as China and India. I know that as demand increases, and given an inflexible supply, oil prices will increase. But I do not see the link between industrialization and oil.
How does oil come into play with industrialization? Most machines used to produce goods run on electricity, which could use nuclear, hydro, coal, or natural gas as an energy source. So if oil is not used for manufacturing, then why does the industrialization of China and India strain the world's oil supply? Is the fact that more Chinese and Indians are driving cars the sole reason for why the price of oil has sky-rocketed, or have I overlooked an obvious factor?
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The article's premise carries with it an assumption that itself is flawed or at least is not always correct. As supply dwindles and demand hold firm, price will increase making oil more expensive and eventually reducing demand. The result is that the market creates its own self conservation effort. The premise of a slowly dwindling supply should hold true of any limited non-renewable resource, and the assumption is that the supply dwindles over a long enough enough periord of time for the market to react.
Although "dwindling supply and increasing price, creating conservation," can and has occured, we also know of instances where, 1) supply stops too quickly for the market to react, 2) reaches a point of nonrenewability prior to the market appreciating what is occuring, or 3) the soceity lacks any plausible alternative to the resource. Two examples are societies that overfish an ocean area before the fisherman realize they have fished the area out, or overcutting forests to a point where a forest cannot renew itself. In these instances, the market comes to realize only too late that the supply is dwindling. Since the point of renewability passes, conservation efforts brought on by increasing price become irrelevant since the fish stock continues to be depeleted or the remainig forest cannot regenerate itself fast enough no matter how high the price or what the society does to reduce further havesting.
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