Oil

[andrewducker]

Been doing a bit of reading.

My (not very well educated) guess would be that oil is currently overpriced. The price should have gone up - but it's bubbling at the moment, pushed up even higher by investors ploughing money into it purely because the short term trajectory was upwards.

However, it's definitely on an upward march anyway, so it might not come back down easily - entirely possible it'll plateau.

Most things don't though - so I expect it to come back down again in the near future. But I very much doubt it's going to drop back under $100 ever again.

Comments

[johanna-alice.livejournal.com]

That sort of depends on whether the technology to get oil out of currently financially unfeasible fields develops to viability or not. There's also the potential for deep-ocean rigs to be developed (The real reason for the Falklands War). Finally, there is oil on every inhabited continent - lots of it being Mesozoic in age. Antarctica was subtropical in the Mesozoic too and offers great potential for new reserves to be discovered - but only if global warming proceeds apace so we can get to it!

All in all a rock and a hard place...

You're probably right about $100 minimum. But thats OPEC squeezing the last few $'s out of the petrol-culture.

[andrewducker]

OPEC has less control than people think. Everyone bar Saudi Arabia is running at full capacity, and they don't have the refineries. Oh, and have quite possibly already peaked - many people think that their supply figures are dodgy at best.

We already have the technology to pull it out of currently financially unfeasible fields - the question is whether the prices stay high enough in the long term for the investment to come through...

As to the Falklands, I'm afraid I don't believe that was about Oil - it was about a shaky military government deflecting public opinion onto something safe (like grabbing back "their" islands) and the British government playing the populist/nationalist card for political gain.

[johanna-alice.livejournal.com]

The thing about unfeasible fields is that the bar keeps dropping as new techniques are developed. At the moment offset drilling allows us to get at the oil vertical drilling cannot reach, but things like deep ocean drilling are still impractical despite the fact oil is there. Most of the off-shore drilling going on is in relatively shallow seas (North, Caribbean, Red). We'll need something along the lines of an automated submersible drilling facility to get at deeper stuff, and oil drilling doesn't really automate too well. (doing Geology has the odd up point :)

The Falklands was about lots of things, all of which added up to having us go to war being an attractive proposition for Mrs Thatcher. Oil was and is a factor in the S. Atlantic, which is one of the reasons the Royal Navy usually has a gunboat bobbing about down there somewhere even now after Argentina has added a clause about seeking the sovereignty of the Falklands by peaceful means only in the future into its constitution.

What I think we'll see in the future is not so much dispute over the oil fields, but bidding wars to give oil producers the best deal for allowing a pipeline to the end users (who'll build their own refineries) to be built... Take a country like China, which has a booming economy, vast need for fossil fuels, and possibly the only army in the world big enough to protect a vulnerable pipeline from the inevitable insurgents... Uncle Sam doesn't stand a chance against that, and the price per barrel will continue upwards driven by the US economy's need.

Don't worry though. In forty years or so it will all be over bar the shouting when the damn stuff runs out at last :)

[captainlucy.livejournal.com]

Part of the problem with this is that the price of oil is still, by and large, constrained to the US Dollar. And when the dollar devalues, as it has done recently, the price of oil obviously goes up concurrently. $135/barrel isn't too bad in the UK when the £ is sitting happily at $2.00 a pop, but when it begins to slip (I think it's at $1.86 or thereabouts at the minute) it begins to bite more. But even with a strong currency such as the Euro, the price trend has been upwards (though not as steeply, obviously).

Oil is probably the most highly prized commodity these days, and the producing countries are now fully realising the power they have over the rest of the world (and especially over the value of the dollar - it's no coincidence that as the price of oil rises, the value of the dollar falls). And with the cmobination of growing demand and potentially dwindling supply, I think not only will we never see the price go below $100/barrel again, probably $125 won't be a realistic bottom line for very much longer.

[andrewducker]

It's not the producing countries - they haven't cut back greatly, or done anything to provoke the price increases. It's that China is now wanting to buy oil as well - and when demand increases while supply is stable, prices go through the roof.

The reason the price of oil is going up as the dollar falls is that you can buy less oil for the same amount of dollars - effectively, oil is now priced against a basket of different currencies, and as the dollar falls prices go up.

Check the interesting graph here:
http://worthwhile.typepad.com/worthwhile_canadian_initi/2007/10/recent-oil-pric.html

[ms-tek.livejournal.com]

I would have to agree with this sentiment.

But you know what (and this is selfish of me for saying so), as an American, I am happy this is happening. FINALLY people are getting their asses in gear and trying to figure out ways to be more efficient. Dealerships can't even give SUVs away anymore. People are learning they have to be frugal. More and more people are taking their own bags to the store. People are thinking...

We NEEDED this to happen to try to get out of the doom that I think is inevitable anyway. Thank God for high oil. Innovate, evolve, or die.

[octopoid-horror.livejournal.com]

I like the way that in the US the price of petrol at the pumps is starting to affect people's choices about travel. Imagine if the price there jumped to what it is here. Heh.

[calcinations.livejournal.com]

As I expected. I knew over a year ago that oil was going to increase in price. Of course not having any spare money made it a bit hard to capitalise on my expectations...

[guyinahat.livejournal.com]

According to my man on the inside, a major factor is speculators buying up oil futures. A lot of them are willing to pay silly amounts for oil futures for 2011 to 2015 on the assumption that the price will be even higher by then (and they will therefore have made a stinking profit). However, there is a strong suspicion that the price will not sustain and these speculators will get burnt as we move on to the next in thing profitable sector.

Apparently conservative industry forecasts for the medium term have it going back down to $85. But that's conservative in terms of industry people not wanting to over-estimate profits, so it may well stabilise higher than that.

[vereybowring.livejournal.com]

The whole deal with oil is about what producers and governments think they can get away with charging in price and taxes, oil prices have been kept high for some time now.
Seemingly the cost of producing the oil we are using now has not really changed in the last twenty years but the price has marched up relentlessly as both the companies and the governments see the end of oil approaching.
The oil companied have in general been lacklustre in finding ways to either find more oil or extend the supplies they have now.
It's only really in the last decade that businesses that rely on oil have started to become more efficient or look for alternatives.
I see on the news this morning british truck drivers are lobbying again to save them from the costs or they will go out of business, this is the nature of business though so I really find it hard to sympathise.
Haulage and shipping will be the first to be hit really hard along with energy companies.
Gone at some point will be the cheap import goods that let the west thrive (and china too), we will either have to return to getting goods more locally or invest far more in the alternatives to oil.
I really don't think people over the pond can complain as they have been artificially keeping petrol prices low to let their economy remain buoyant - now this is becoming impossible and the people are having a moan.
The good years of petrochemicals are failing fast and we just have to deal with it.

[andrewducker]

British truck drivers will either have to go out of business or....put up prices. I suspect the latter is more likely.

And I think you're totally right about the globalisation changes that are going to happen - also probably a good thing.