The oil story on The Economist covers in a single chart

21 Jan

Oil is on the cover of The Economist again. This is how oil price history looks like, showing Economist covers featuring oil, as the story unfolds. Their record is mixed, but actually improving. economistFrom drowning in oil to record prices, and back…

One and half year ago I wrote a short post on the oil cycle on Economist covers (What comes after oil? Mostly oil). I finished that post with this: ‘We wonder what might come next, and judging by the usual frequency we only have to wait a couple of years…’

Indeed we did not have to wait long. Oil prices dropped to below 50 USD/barrel, by more than 50% (here is our post on the reasons) and here is the new Economist cover…

The new issue’s main message is that governments should use the oil price fall to get rid of subsidies and increase excise taxes (‘once-in-a-generation opportunity to fix bad energy policies’), which we totally agree with.

And this message is actually nothing new. Just read these quotes from the issues on the chart above (in reverse chronological order):

From this perspective, governments should speed up the adjustment—or at least stop delaying it. Half the world’s people are sheltered from fuel prices by subsidies—which, perversely, have boosted demand and mostly benefited the better off. – RecOil, 2008.

‘It is time for governments to scrap price controls and subsidies to allow the market’s price signals to get through to consumers.’  – The Oiloholics, 2005.

The best way to curb the demand for oil and promote innovation in oil alternatives is to tell the world’s energy markets that the “externalities” of oil consumption—security considerations and environmental issues alike—really will influence policy from now on. And the way to do that is to impose a gradually rising gasoline tax.- The end of the oil age, 2003.

There is no better time to perform the politically awkward feat of raising taxes than when oil prices are low and the money can be quickly handed back in lower taxes elsewhere. – Drowning in oil, 1999.

It was really interesting to reread those leaders now. And to do justice to the 1999 ‘bad call’, this is how the Economist leader of 1999 issue finished:

By all means, welcome the return of normality to oil markets and the end of OPEC‘s power. But just as oil’s scarcity seemed a fact of life in the 1970s, its abundant flow might be too easily taken for granted today. Normality could last a while; but it is unwise to assume that it will endure for ever.

A fair bit of deja vu…


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