But there are solid reasons why the world has now convinced itself that oil is worth much less than before. On one side of the ledger there is supply, not only of oil itself, but also of the other fossil fuels which can often substitute for it, notably gas, which is more abundant than anyone would have imagined a few years ago, courtesy of the fracking boom. On the demand side, things have been developing even more rapidly, with a serious slowdown in the resource intensive emerging economies, above all debt laden China. The fracking revolution will not be reversed, and it increasingly looks like the Chinese flu will be hard to shake. All of which suggests that low oil prices could be here for a while.

Q.

"I've heard many reasons why our nation should reduce its reliance on petroleum vehicle fuels. One is that relying on imported oil makes our economy dependent on the political whims of foreign rulers. Another is that other energy sources, like the possibility of hydrogen based fuels, are less harmful to the environment. And a third is that petroleum is not a renewable resource so when we've used it all up, it will be gone! But I don't think we're likely to use it all up for at least another fifty years. And by then we'll have invented new and better fuels and more fuel-efficient vehicles too. So that argument doesn't worry me. And I don't really believe the stuff about how foreign leaders can force our nation to change its policies simply by decreasing their oil production. Oil companies like Exxon have made record profits precisely in those times when the supply of foreign oil was reduced. I don't see the big oil companies being very interested in policy change when the money is rolling in. And for another, our nation has demonstrated that it is willing to wage war rather than to permit foreign leaders to push us around. So this whole thing about how we have to reduce our reliance on petroleum based gasoline, diesel, and jet fuel is bogus."

The speaker's reasoning is best evaluated as

Q.

Crinoline and croquet are out. As yet, no political activists have thrown themselves in front of the royal horse on Derby Day. Even so, same historians can spat the parallels. It is a time of rapid technological change. It is a period when the dominance of the world’s superpower is coming under threat. It is an epoch when prosperity masks underlying economic strain. And, crucially, it is a time when policy-makers are confident that all is for the best in the best of all possible worlds. Welcome to the Edwardian Summer of the second age of globalisation.

Spare a moment to take stock of what’s been happening in the past few months. Let’s start with the oil price, which has rocketed to more than $$$ 65 a barrel, more than double its level 18 months ago. The accepted wisdom is that we shouldn’t worry our little heads about that, because the incentives are there for business to build new production and refining capacity, which will effortlessly bring demand and supply back into balance and bring crude prices back to $$$ 25 a barrel. As Tommy Cooper used to say, ‘just like that’. Then there is the result of the French referendum on the European Constitution, seen as thick-headed luddites railing vainly against the modem world. What the French needed to realise, the argument went, was that there was no alternative to the reforms that would make the country more flexible, more competitive, more dynamic. Just the sort of reforms that allowed Gate Gourmet to sack hundreds of its staff at Heathrow after the sort of ultimatum that used to be handed out by Victorian mill owners. An alternative way of looking at the French “non” is that our neighbours translate “flexibility” as “you’re fired”.

Finally, take a squint at the United States. Just like Britain a century ago, a period of unquestioned superiority is drawing to a close. China is still a long way from matching America’s wealth, but it is growing at a stupendous rate and economic strength brings geopolitical clout. Already, there is evidence of a new scramble for Africa as Washington and Beijing compete for oil stocks. Moreover, beneath the surface of the US economy, all is not well. Growth looks healthy enough, but the competition from China and elsewhere has meant the world’s biggest economy now imports far more than it exports. The US is living beyond its means, but in this time of studied complacency a current account deficit worth 6 percent of gross domestic product is seen as a sign of strength, not weakness. In this new Edwardian summer, comfort is taken from the fact that dearer oil has not had the savage inflationary consequences of 1973-74, when a fourfold increase in the cost of crude brought an abrupt end to a postwar boom that had gone on uninterrupted for a quarter of a century. True, the cost of living has been affected by higher transport costs, but we are talking of inflation at 2.3 percent and not 27 percent. Yet the idea that higher oil prices are of little consequence is fanciful. If people are paying more to fill up their cars it leaves them with less to spend on everything else, but there is a reluctance to consume less. In the 1970s, unions were strong and able to negotiate large, compensatory pay deals that served to intensify inflationary pressure. In 2005, that avenue is pretty much closed off, but the abolition of all the controls on credit that existed in the 1970s means that households are invited to borrow more rather than consume less. The knock-on effects of higher oil prices are thus felt in different ways - through high levels of indebtedness, in inflated asset prices, and in balance of payments deficits.

There are those who point out, rightly, that modern industrial capitalism has proved mightily resilient these past 250 years, and that a sign of the enduring strength of the system has been the way it apparently shrugged off everything - a stock market crash, 9/11, rising oil prices - that have been thrown at it in the half decade since the millennium. Even so, there are at least three reasons for concern. First, we have been here before. In terms of political economy, the first era of globalisation mirrored our own. There was a belief in unfettered capital flows, in free trade, and in the power of the market. It was a time of massive income inequality and unprecedented migration. Eventually, though, there was a backlash, manifested in a struggle between free traders and protectionists, and in rising labour militancy.

Second, the world is traditionally at its most fragile at times when the global balance of power is in flux. By the end of the nineteenth century, Britain’s role as the hegemonic power was being challenged by the rise of the United States, Germany, and Japan while the Ottoman and Hapsburg empires were clearly in rapid decline. Looking ahead from 2005, it is clear that over the next two or three decades, both China and India - which together account for half the world’s population - will flex their muscles. Finally, there is the question of what rising oil prices tell us. The emergence of China and India means global demand for crude is likely to remain high at a time when experts say production is about to top out. If supply constraints start to bite, any declines in the price are likely to be short-term cyclical affairs punctuating a long upward trend.

What can be inferred about the author’s view when he states, ‘As Tommy Cooper used to say “just like that”’?

Q. Normally, falling oil prices would boost global growth. This time, though, matters are less clear cut. The big economic question is whether lower prices reflect weak demand or have been caused by a surge in the supply of crude. If weak demand is the culprit, that is worrying: it suggests the oil price is a symptom of weakening growth. If the source of weakness is financial (debt overhangs and so on), then cheaper oil may not boost growth all that much: consumers may simply use the gains to pay down their debts. Indeed, in some countries, cheaper oil may even make matters worse by increasing the risk of deflation.

Q. There are four fuels which all contain only carbon and hydrogen. The fuel having highest calorific value will be one which has:

(a) more of carbon but less of hydrogen
(b) less of carbon but more of hydrogen
(c) equal proportions of carbon and hydrogen
(d) less of carbon as well as less of hydrogen

Q.

There are four fuels which all contain only carbon and hydrogen. The fuel having highest calorific value will be one which has:
(a) more of carbon but less of hydrgogn (b) less of carbon but more of hydrogen
(c) equal proportions of carbon and hydrogen (d) less of carbon as well as less of hydrogen