Posted on 12/18/2009 3:03:21 PM PST by blam
Why Stresses To The Global Economy Will Push Oil To $40
Euan Mearns
Dec. 18, 2009, 6:31 AM
(This guest post was originally published by Euan Mearns at The Oil Drum. This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.)
Figure 1 Oil supply - demand - price chart, Jan. 2002 to Nov. 2009. See text for explanation. Click to enlarge and open in separate browser window.
In February this year, global oil production / demand hit an interim low of 84.0 million barrels per day (mmbpd) and the average price of West Texas Intermediate (WTI) that month was $39.16 / bbl. Since then, demand has recovered to 85.9 mmbpd in November and the average price was $78.08 / bbl. A rise in demand of 2.3% has led to an oil price rise of 99.4%.
Full explanation of the chart and a discussion of what 2010 might have in store is below the fold.
Every year about this time I meet with an old university friend, who is also a geologist, and we make a bet on where the oil price will be in a year's time. My "forecast" from a year ago:
My forecast is $80, based more on hope than anything else. My friend bet $55 and so, with Brent on $71.50 (17 Dec 2009) it looks like I will win that pint of beer this year, based more on luck than anything else. It has always been near impossible to forecast the oil price, but since 2002 we have entered a supply constrained situation where the relationship between supply, demand and price seems to allow a more informed approach to predicting the future. So what does that chart up top tell us?
{snip]
(Excerpt) Read more at businessinsider.com ...
I would love to see $40 a barrel, but that will mean that the world and our economy is in the crapper... LOL...
I believe it already is, but not many recognize it, or if they do, they are hoping no one else does.
It also means many of our own wells will shut down and development of shale oils and other domestic alternatives will slow.
In fact at $40, not only will we not drill, but we will shutdown the output of most domestic production wells.
Well, goodness, this would certainly drive down the price of fertilizers.
I call BS on this to the degree that all it takes is one ochestrated “terrorist” attack against a major pipeline, etc. and the price skyrockets. Even more, all it would take is for Iran to threaten or mine the Straits of Hormuz and the price of oil skyrockets.
But the peak oil people say we are out of oil... It will go up.
The sad fact of the matter is that the semi reasonable,semi pragmatic OPEC members no longer run the place.Now,Chavez,ImANutJob & Friends control things and they won’t tolerate $40/barrel oil.They’ll (successfully) demand production cuts just to teach the capitalist running dog infidels a lesson.Even it it hurts their bottom line.
Well you are right about the fertilizer, but thank goodness
there are still plenty of bovine generators which can take up the slack,in rural areas. As a matter of fact, you might have just pointed out a way for a lot of money to be made by a few who can see through the fog to getting it to those who don’t have it.
It will be in the crapper, thats the plan. Why else do you think the money presses run 24/7?
No, we are in for years of bad economy, unless the pretend president and his Junta are forced to turn around 180 degrees, no chance of that before 2012, unless they are taken out some other way.
I’ve read here and there that there are many many tankers full of oil just sitting in the ocean. The people that own them are holding on, waiting for the prices to go up.
When oil was $140 a barrel we were paying over $4 a gallon. It went to $35 a barrel, we were paying $2 a gallon. That makes sense to you?
It’s $70 ish a barrel now and we are paying $2.65.
What difference does it make to the average Joe out here, we will still pay $2 a gallon or maybe down to $1.85 when oil hits $35 a barrel, when it should be .75 cents a gallon
That’s because about 50 cents of that is the gas tax. That doesn’t get reduced even when the price goes down.
Garde la Foi, mes amis! Nous nous sommes les sauveurs de la République! Maintenant et Toujours!
(Keep the Faith, my friends! We are the saviors of the Republic! Now and Forever!)
LonePalm, le Républicain du verre cassé (The Broken Glass Republican)
I.e., the upper price of oil may flucuate a bit around the equivalent of $4 a gallon gasoline, but can't stay above that for long during our lifetimes and those of our great-grandchildren.
It already is at $40 a barrel.
The problem is the dollar is a fifty cents.
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