Oil has continued to set new recordsover the past few weeks. Indeed, it is on course to break US$90. It is noteworthy that oil companies and their supporters continue to ridicule the increases and the growing prospect of US$100 oil. THe overall effect of these denials will be the undermining of the credibility of the industry and its supporters.

Exxon Mobil chief Rex Tillerson last month had a tough time facing an industry gathering in Canada's oil-rich Alberta province especially in giving a straight answer for the oil price levels. His reason that fundamentals behind supply and demand do not support. Yet right after he made this statement, oil prices rose again even though there were no breaking news of major supply disruptions. Indeed, during this same period, OPEC announced that it was raising its production.

Mr. Tillerson's statement made in Alberta does however bring into focus an interesting development in Alberta province. Observers have noted that Alberta has caught the strain of what pundits have described as "resource nationalism" fever. This "fever" has already swept such oil-producing nations like Russia and Venezuela.

These two countries are at the forefront of a new trend of oil-rich countries seizing control of national oil assets from international investors, sometimes with little regard for the legalities of signed contracts.

Indeed, after Mr. Tillerson warned Albertans not to tamper with existing oil royalty rates,a provincial government appointed panel shocked the industry calling for a sharp rise in royalty payments of nearly C$2 billion a year.

National oil companies are on the rise. Backed by their governments, these companies have shown how easy it is to reclaim resources or renegotiate contracts in their favor.

This trend combined with the slow rate of new finds, the miserly size of recent discoveries and the long lead time and high cost of of bringing these resources to market make for a continued trend of rising oil prices.

Political and military conflicts have also escalated in key producing countries like Iraq and Nigeria while Iran and Venezuela remain at odds with the west. All these dampen their collective ability to fully respond to the rising prices.

The rapid decline of the US dollar also offers another incentive for investors like China and India to exchange their large US dollar holdings for hard assets like oil. Even smaller MIddle East oil companies are acquiring oil assets abroad.

Consumer societies need to prepare for the transition from a current oil-dependent lifestyle and economy to one that looks into energy saving and storage strategies as well as exploring alternative energy resources such as Liquid Natural Gas and other energy sources.

Learn more about this author, Anthony Mendoza.
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