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Politics : Welcome to Slider's Dugout
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To: JimisJim who wrote (9154)4/12/2008 9:36:35 AM
From: jim_p  Read Replies (3) of 50749
 
Good post.

The other factor you left out is that recoverable reserves (PDP and PUD) are a function of price. The higher the price, the more reserves you get to book at year end because you are not allowed to count reserves if the cost of production exceeds the current price of oil or NG.

Since Exxon's additional discoveries only replaced production in the last year, what that really means is if the price of oil had not increased Exxon would not have even discovered enough new reserves to even replace their production much less to cover any increase in demand. If you analysis the makeup of additional reserves you will discover that in many cases the increase over the last year came from “revisions” to existing reserves and not from "new discoveries” or from the increase in the price of oil and NG.

In addition in past economic recessions the demand for oil has never decreased. Only the rate of increase in the demand for oil has declined and in some cases it has declined down close to zero growth.

So what happens when to the economy when the supply of oil is less than the demand for oil and world production begins to decline regardless of price??? It will happen and most likely it will happen in your lifetime. Do you think the new middle class in China and India are going to go back to riding bicycles?

Reserves are overstated in the Middle East mostly because OPEC's production quotas were based on a percentage of what each country stated was their maximum production capability. So every country had a huge incentive to over state their production and reserves back when there was a surplus of oil.

Jim
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