Quote:
Originally Posted by Andrewl
Except in he past when prices got too high/demand became too close to supply for too long, it was far easier to ramp of production. Today that is not just not the case. Yes, producers intentionally keep supply and demand as close as possible, but presently we are in a situation where it is extremely hard to produce much more than the ~85 million barrels per day that has remained flat for the last few years. Many analysts and most geologists doubt that we will ever be able to produce much more than that. Meanwhile world demand based on predicted/desired growth is going to be @ 120 million barrels per day by 2030... nobody knows where that oil is going to come from... and that is the fundamental factor effecting pricing.
|
OPEC strategy has been highly dependent on increasing high cost production such as Canadian tar sands oil by keeping overall production as close to demand as possible while factoring in USD devaluation to drive pricing. The last numbers I read put Candian tar sand exploration/production costs at close to $30/barrel, unthinkable even a decade ago. Those costs will actually be reduced as production increases, but new exploration/production costs will offset any savings. The market entry of tar sand oil from Canada, coming in Venezuela and other reportedly vast fields in other countries actually played the major role in helping the Sauds reduce their production, saving for a rainy day as they term it.
Australia's largest trading partner is China and China has supported Australia's Nigerian efforts (of which Canada is involved as rig drillers and operators) and their efforts to become a major player in refining lower grade crude from Venezuela and other producers. China has the capital and they aren't afraid to spend it on commodity exploration/production, and not just oil.
Quote:
|
Agreed. We will also have lots and lots of war to determine who gets whatever supply is available.
|
I think economics will eventually play the larger role in commodity acquistion. The US is the primary world aggressor and as we decline to a full service economy it'll become far less expensive to pay the price than attempting to field the hideously expensive and mostly useless military levels we currently entertain.
Quote:
|
Its hard to trust pronouncements about the oil market from members of OPEC. They have far too many stakes in the game.
|
See my OPEC comments above.
Quote:
|
IMO, what we are seeing in terms of geopolitical attention, speculation, futures market, etc.. is a reflection of an underlying tension that has everything to do with supply and demand.
|
Eventually, yes. At this point in time supply is adequate but that won't last for much longer. The current question is how long the declining US economy and high-cost exploration/production will offset increasing demand from China, India and other developing countries.
Quote:
But i do agree with Iran's president. $115.00 does not reflect the true cost/value of oil. Its nowhere close to its real value in terms of its value to the economy and growth, as well as the environmental costs. $115.00 still reflect mainly a heavily subsidized commodity.
Andrew
|
That's a foregone and reasonable conclusion. All that's holding it back now is US fiscal desperation with military threats and the ongoing calculations of what will replace oil for food production and transportation requirements. Once that product(s) is identified, oil will immediately shoot up to that price and then far beyond. I'd like to see crude at $250/barrel immediately with a portion dedicated to capitalize emergency alternative energy research and development programs. I'd actually be surprised if some OPEC producers haven't already suggested same, what an investment opportunity, but US politicians aren't going to willingly allow that to happen. If future markets do it, they can rationalize why soccer moms have to park their SUVs by blaming someone else. Since many oil producers are currently facing a US gun barrel with regard to production they must tread lightly. 2008 is going to be an interesting year.