Interesting Article from Dallas Fed

Here you will find a good economic perspective on the prospects for oil and gasoline markets. The article has a supply emphasis:

Having oil is one thing. Delivering it to a growing market is another. World economies differ greatly in their capacity to organize enterprises, adopt new technologies, raise capital and supply what consumers want. When it comes to increasing oil production, economic systems matter quite a bit. More oil would flow onto world markets and prices would be lower if major oil resources were in countries where producers responded freely to market incentives. The extent of economic freedom in the countries with the world’s oil supplies will greatly affect how well that oil is delivered to consumers.

Even though the vast majority of current oil production comes from inefficient, socialist state control, the authors are optimistic:

To a great extent, rising oil prices are self-limiting. Higher oil prices encourage conservation and development of unconventional oil resources and alternative fuels. Higher oil prices should also help overcome at least some of the difficulties in developing the vast conventional reserves not fully connected to the market [for example, the tar sands located in Canada’s province of Alberta]. In the long history of natural resources, the prospect of scarcity and higher prices has provided ample incentive for innovation.

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