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How the UK will benefit from $135/barrel oil

For sure, oil prices climbing to such extortionate levels has huge potential to damage the world economy. A rising oil price hits consumers not just at the pumps, but in the prices of everything that needs a ship, plane or truck or all three to arrive at the shop -- which is pretty much everything we buy. Such inflationary pressure building up through the chain of production, and biting consumers deep, can only be bad, for sure?

Well perhaps not. No question, although the demand for oil remains embarassingly ineslatic in the short-run, $135 barrels might finally be the incentive the rich world needs to beat its oil addiction. If the West can develop technologies which ultimately overcome a dependence on oil, not only is this a huge step in the (widely accepted) right direction away from carbon pollution, but also escapes the political stranglehold of the oil rich countries in the Middle East and the Gulf. And although Carbon taxing may be perceived as a safer way of forcing us away from oil - of course we'd rather our cash flow into UK treaury than dubious regimes abroad - it would never have been a politically viable option for any government to pump up the price this high.

And the UK, of course, a world leader in fuel-technology is as well placed as any other country in the EU, the USA or the Far East to develop these desperately needed technologies. If the government are serious enough about this, and increase investement in these fields, the UK would not only be able to sell the ideas to foreign firms, but an escape from the perpetual risk of supply-side shocks and dependence on the most unstable region on the planet would surely put the UK at a competitive advantage in the next century.

As such, as OPEC greedily choke off supply, they may be laughing for now. But they could in effect be digging their own graves. It is up to us to ensure the UK has the last laugh.