Well here it is 2008 and oil is now at $130, and yet, supply is falling. And you, the idiot that you are, believe some mystic cartel is holding back.
IMO the real problem with oil is the wave of nationalization of oil companies. Most of the worlds oil reserves and territory with good oil prospects are in the hands of national oil companies - about 80%. These NOC's usually don't make investment decisions like normal businesses (some do - notably Petrobras & Petronas). Politics drives things and politicians are bad managers.
Russia, Venezuela, Mexico are examples of countries which should be growing production but their production is going down instead because of poor mgmt by the politicians. The politicians take money from the NOC and it is starved for capital to do the exploration and development needed.
the argument frequently made by energy professionals was that as the price of crude goes up, it will spark more exploration which will result in more oil getting brought on line.
That is happening where profit-seeking oil companies are allowed to invest - which means not in Russia, VZ, MX, not in most of the ME countries. But investment is taking place in Canada, the US (those places not under drilling bans anyway - like the deepwater GOM), Brazil, west Africa, a few other places. So far discoveries haven't been enough to bring down price due to increasing demand from China, India, etc.
For some time, most of the news re. oil supply has been bad. Recently I've noted a few good news items - like SA starting production from a new field-Kharsaniyah (.3-.5 M bpd), Iraqi exports going up (a few more hundred thousand bpd), a big (.5 M bpd) export-oriented refinery in India built by Reliance starting in July which can handle heavy oil from the Persian Gulf which currently isn't being sold due to limited refineries that can handle it, US consumption declining as a result of high prices in dollars (down from last year .7-1.0 M bpd depending on what source you read). There is a possibility we could see a drop in oil prices later in the year. And speculators like hedge funds have been buying oil futures and selling the dollar - profitable in the past - if the price does begin falling and a lot of such things get unwound, the drop could be sharp and sudden. Course that is just me thinking .. who knows if it'll happen - I'm just saying here this is a possibility. And btw, if the price does drop, will SA (the swing producer in OPEC) step in and cut back to support prices???
And the long term problem remains. So prices will be back up again down the line.
At least CJ and I understand economics.
I hope your understanding is that supply and demand drive prices. |
