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Oil. It lubricates the cogs of global economy. But our dependence on this fossil fuel comes at a cost -- air pollution, carbon emissions and toxic oil spills. Dr Scott Tinker examines the factors driving the demand for oil.

"Oil. It’s so important, that many feel we’re too dependent on it. For a hundred years, oil has made the world go round. Literally. Not only the cars, scooters, trucks and buses that take us to work, school and the store every day. But the global flow of commerce as well, bringing every product from where it’s mined, made, or grown, to where it’s used – often a long journey, powered by oil.

The reason for this, is that oil is a fantastic transportation fuel. It packs a huge amount of energy into a compact, lightweight, liquid form. Easy to transport, easy to store, and easy to pump into a gas tank. And while it’s mostly used for transport, it can also be used for heating, power production, and is an incredibly versatile chemical feedstock. Even today, it’s still remarkably cheap given the many social and economic benefits it provides. But there are other costs.

The world’s largest oil consuming countries spend billions of dollars and huge political capital trying to stabilize oil regions each year. Then there are environmental costs. Many small and a few large oil spills; smog and local air pollution; and more than a third of our CO2 emissions come out of the tailpipe. But the biggest challenge with oil, is that it’s virtually our only transport fuel – 97% of global transportation runs on it.

This gives oil an excessive influence on the global economy. This can be good: low oil prices usually mean a booming economy. Or it can be bad. High oil prices are almost always followed by recession. And a shock to the global supply of oil, we’ve seen, can cripple the world economy. The solution, just like in a stock portfolio, is to diversify into other transportation fuels. As oil prices rise in the future, alternatives will become more competitive, and more will take hold in the market.

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