BUSTAMANTE, Patricia M.

05 March 2017

The paper The Perilous Price of Oil by George Soros which was a fragment of his
testimony given before the US Senate Commerce Committee Oversight Hearing on June 3 2008,
basically argues that rising prices in oil creates a market perceptions that in the future demand
will increase and the supple will dwindle. That makes purchasing oil more attractive as the
greater demand for it drives up the price. The author just related it to his background in finance
and his experiences working with it, as well as the financial crisis of 2008 which was heightened
by the use of CDOs or Collateralized Debt Obligations, which is very relevant during the time
this piece was written by the author.

The article pointed out a lot of important aspects regarding oil, such as it costs a lot to
discover and develop new reserves of oil which, the already existing ones by the way, has a
dwindling and ageing yield. Oil is a scarce resource, and even if the demand and prices go up
the supply cannot keep up with it. For other countries, it would be a strategic move for them if
they sell or tap their oil reservoir slowly. But then, of course, it is not absent of significant
consequences.

In addition to this, in some countries, according to the article, subsidies are provided for oil
acquisition, exportation and production, particularly by the countries in Asia. Hence, energy
pries remain artificially low and the demand is not reduced by the increase in prices, which is not
a common economic phenomenon or scenario. Of course, this article was written in 2008. A lot
has happened since then when it comes to government and international policy. Hence, we have
to take that into consideration before making generalized statements.

Given the above facts and gist, I think that it is about time that we explore alternatives that
are healthier for our environment and economy. Necessity is the best teacher, and I have seen
steps being taken toward that direction from e-trikes to the use of solar panels. Substitutes and
alternatives to this need to be explores so that we can predict economic patterns more timely and
accurately and be able to brace ourselves for what is to come.