Datuk Seri Idris Jala, CEO of Malaysia Airlines, believed that there was no global fuel shortage. (The Star, June 5, 2008)
Idris Jala was a former senior executive with Shell. Speaking at International Air Transport Association annual general meeting held in
“Look at the oil tankers at sea. If they are not moving and just floating out at sea, that means they have no crude or processed oil to transport. That is not happening and this can only mean there is no shortage.”
I am not sure if his reasoning is correct. We know that there is shortage when demand exceeds supply. Based on the example given by the MAS CEO, we can deduce that supply for crude oil is consistent. What has not been mentioned is that demand is on the rise.
Furthermore, the fact that there is no shortage now doesn’t mean there is no shortage in the near future. After all, crude oil is traded in futures market.
Anyway, if Idris Jala is right, the oil price should eventually drop, as speculators sell their oil futures. The MAS CEO thought that US$40 was the “fair value” for a barrel of crude.
Now, while I am feeling the pinch of the oil shock, I hope the crude price will NOT drop to $40 per barrel. At that level, we will not give a thought to renewable energy and energy conservation. Perhaps a figure between $80 and $100 is just right.
As for the price at Malaysian pumps, maybe in the RM2.40 – RM2.70 range.