There's still a debate on how much of the current oil price is a speculative bubble and how much of it is real, but increasingly I think it looks real – reflecting the growing demand for oil and its limited (and highly politicized) supply.
We know from the 1970s what a rapid rise in the oil price does for oil-dependent countries. People use oil, and oil-based energy sources, more sparingly. And more efficiently: US energy intensity (the energy used per unit of GDP created) has been cut by over 40% in the last thirty years. America is getting more bucks to the barrel. Cars are smaller, lighter and more fuel-efficient. Our domestic boilers use less oil. Factories are built to capture and re-use spent heat. And we insulate our homes more effectively.
I've a feeling that the oil price creeping up to $135 and beyond will do more to reduce carbon emissions than any number of platitudes and plans from Kyoto. That's all mostly rhetoric, and few of the world's politicians are actually living up to their rhetorical commitments. A rising oil price, by contrast, affects us all, and prompts us to change the way we use energy. But that's the market, isn't it?