Why costly oil is good news?

World oil prices are soaring and pushing up inflation, especially in oil dependent countries with export deficit.

Instead of it being a bad news, in my opinion it is a very good trend. Most probably the rate of Oil is going up in speculative trade. People betting on worldwide (specially US) recovery, and are pushing up the prices.

If economics is indeed the science of incentives and dis-incentives to elicit a desired human reaction, then high price oil will elicit a response from consumers of looking for alternatives. One alternative people will look for is Public transportation instead of private, which is a good thing.

But, another trend that’ll catch on is alternative energy. As cost of fossil fuel levels with newer energies, world will invent to adopt these new forms of energy more aggressively. High priced oil will be good enough incentive for govts and large corporations to plug large sums of money in to research that’s right now decades away.

Third reason why high oil price is good is because …. Our environment may finally get a respite!!