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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Little Joe who wrote (256)	7/22/2003 8:55:13 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

Recently there was a huge discovery of oil in Iran. Does anyone know how significant the discovery is relative to existing world supplies? i recall reading an AP blurb on this. keep in mind that press releases about oil reserves from the ME are even less reliable than pro forma earnings reports during the dotcom bubble. the figure i saw was something like 32 gigabarrels (Gb) from a combination of three fields. the article also stated that certainly not all of this oil is recoverable. when you consider that 50% recoverability is mighty good to begin with, i take this to mean 30% or less recovery. so say 10 Gb. credible scholars put remaining exploitable reserves at some 900-1000 Gb. so 10 Gb would be an addition of 1% to this figure. of course, the 900-1000 Gb figure already includes an assumption on future discoveries (i.e., the figure is padded in excess of current proven reserves). current world demand is around 28.5 Gb per year, so 10 Gb would be the equivalent of about 4.2 months of demand--not exactly what i would call "huge" in terms of overall, ongoing world oil needs (although 10 Gb is quite respectable for an individual well these days). however, demand is growing continuously at a rate of some 2% a year, so by the time this oil is produced, it would likely be equal to even less. basically, the world has now used up about half of the oil it will ever use. it's not like we're going to run out of the stuff tomorrow. in fact, there are some wells that could be producing even a century from now. the more immediate concern is that the amount of oil which is produced, on a yearly or daily basis, has already or will soon (by 2010 at latest), peak for all time. the scenario envisioned by one scholar i find credible, Colin Campbell, is kind of a production plateau over the current decade and then a gradual decline. this, combined with increasing demand thanks to growth in places like China, is likely to cause oil prices to rise. already they are up 200% from their lows of several years ago. it seems to me that there will be various economic disruptions around the world in response to higher oil prices, thereby causing demand to temporarily contract (at an economic cost) and oil prices to temporarily fall. thus prices can be very volatile over the next decade. just look at the wide range of pump prices this year. in the long run, though, i think oil will go much higher and this will eventually cause problems for our gasoline-dependent suburban geography. so i believe RE prices will be affected eventually by such developments.