There are 3 reasons why oil is likely to stay very expensive.
- Thanks to asia, the world’s consumption of oil is still increasing, contrary to what we saw after the first oil crisis (1973) and after the second oil crisis (1979-1981).
- Outside the Middle East, new drillings are around 10 times more expensive than drillings in the Middle East.
In 2011, the marginal cost of oil production - the cost of production for the most expensive new fields - was $92.26 a barrel for the 50 largest listed oil and gas companies.
The most expensive oil fields essentially set the floor of oil prices, worldwide.
- OPEC’s share of world oil production has been rising since 1985.
The more oil is produced in the Middle East, the more expensive oil will be if there are tensions.
In 2011, the arab spring and tensions with iran caused the price of oil to rise by nearly $40 a barrel.