Friday, July 20, 2007

Will Crude oil sell at $100 soon?

Oil prices are predicted to hit the $100 mark in 2008. It has reached $74 per barrel and is soon reaching the peak level of $78 that it went up to last August.
Contrary to normal demand and supply dynamics,higher oil prices so far have not led to lower consumption.

What are the reasons for ever increased consumption?

  • People are not convinced that high prices are here to stay. They keep hoping that it will stabilise to a more lower and rational level soon.

  • A lot of consumption is built into the infrastructure of our lifestyle.People's travel needs have increased than ever before.

  • Reducing consumption requires a long lead time. Fuel efficient cars are still not the order of the day.

  • Prices are subsidized in places like Iran,Venezuela,Indonesia and China.So higher prices haven`t impacted the market as yet.

  • Bio fuel is still at its nascent stage of being the popular alternative.

  • Developing economies are creating a big addition to global demand.

  • Global crude oil production and supply is peaking and is coming down YoY due to years of underinvestment, mismanagement, lack of technology or political interference.The world`s big fields,like Ghawar in Saudi Arabia,Cantarell in Mexico, and Kuwait`s Burgan field,are all in decline and showing signs of maturity.

  • Not many new oil fields are being discovered to keep up with the world's demand.It is also becoming expensive to drill from geologically challenged new fields. This will only increase the marginal cost of every additional barrel of oil.


  • As yet the world has not run out of oil. But it is certain the world has run out of cheap oil.Sad,but true.

    5 comments:

    knicksgrl0917 said...

    hey! i'm going to cali this weekend and won't be back until september...here is the website i was talking about where i made extra summer cash. Later! the website is here

    NeoAuteur said...

    It's time for us to invest in alternative energy.

    Eternalsoul said...

    @knicksgr10917
    Welcome and thanks. Will check the site.

    @neoauteur
    Welcome to my blog.Yes surely.Never too late.

    Anonymous said...

    Wonder how the world economy is going to be after the price shoots up?....
    are we going to have a war sooner than later over energy?
    Bob

    Eternalsoul said...

    Bob,we've always had wars over energy in the last two decades.