25 April 2008


March 8, 2008

Oil prices 'unlikely to rise further'

OIL prices are not likely to go higher, Minister Mentor Lee Kuan Yew said yesterday.

As crude oil prices hit US$105 (S$145) per barrel, MM Lee believes it is not likely to creep further up to US$110.

'The oil suppliers are testing the limits. They believe that China and India now form a new long-term base demand. They may be right,' he said.

'I don't think it can go up US$110, US$120, US$150 and the world economy goes on. Inflation will go through the roof.

'Economies of the West will go down, hyper-inflation in many developing countries. So it will go into reverse. There's no projection right to the end.'

He said there is little Singapore can do as it is a price taker and not a price giver.

'We cannot influence Opec, we cannot influence the price of oil or gas.

'All we can do is to adjust our consumption, minimise the amount of power we use to provide the same unit of either goods or services. That's all we can do. What else can we do?' he said.

But, MM Lee said, people should not be rattled by the increase in price. Instead, they should remain alert and adjust to changes.

'We have remained a vibrant economy because we adjust to the market. Whether we panic or don't panic, I think it would be foolish not to be alert to the changes and to take steps to meet them,' he said.

'If the world economy goes into reverse, we are going to be hit. And it's not just us. China, India, the whole region will be hurt. So, this is a worldwide problem.

'Food prices, oil, gas, it's not specific to Asia or South-east Asia. It's worldwide.'


Dear MM Lee, I have great respect for what you have done for Singapore, but your comments here highlight your ignorance of peak oil. Oil is the foundation of our industrialization. It is oil that powers our world and our lives. If rice is too expensive, you can turn to other staple foods like wheat, corn or potatoes. Now that oil is getting more pricey, what can we turn to? Unfortunately, there are no substitutes that can equal oil in energy density and industrial versatility. Because there are no good alternatives to oil, demand destruction will not come easily. Oil prices hit $120 recently and I believe it will go much higher before demand destruction sets in.

Related Link.

Geologist Walter Youngquist wrote:

"Oil in its various refined derivative forms, such as gasoline, kerosene, and diesel fuel, has a unique combination of many desirable and useful characteristics. These include a current availability in abundance, a currently high net energy recovery, a high energy density, ease of transportation and storage, relative safety, and great versatility in end use. Oil is also useful as more than an energy source. It is the basis for the manufacture of petrochemical products including plastics, medicines, paints, and myriad other useful materials. Finally, the asphalt "bottoms" from refineries have converted millions of miles of muddy trails around the world into paved highways on which transport vehicles fueled by oil run.

Alternative energy sources must be compared with oil in all these various attributes when their substitution for oil is considered. None appears to completely equal oil"