Monday, January 11, 2016
as major world oil prices of around $30 a barrel, pundits are all over the map when it comes to predicting where the price goes in the future. Who can we trust? Where will price go any year? Into years? And five years? In 10 years? Everybody seems to want to have their say but nobody seems to be able to predict future prices of any sense. Occam's razor depends on choosing the simplest answer as being the most reliable. Let's take a look at the simplest answer to world oil. Price is purely based on demand. That's fundamental economics 101. World demand for oil, because of the overall economic output decline, is down. In fact, there doesn't appear to be any robust economy ready to eat up the excess supply that's currently on the market. It doesn't help that one of the world's largest economies is slowing down, that being China, I'm slowing down quickly. With demand is the other side as I already mentioned: supply. Demand is decreased worldwide yet supply has increased. The United States has produced nearly double the amount of oil from their new shale exploits. Iraq is pumping oil, Saudi Arabia's not slowing, Russia won't decrease production, OPEC will not curtail. Iran will potentially come on the market when their sanctions are lifted. Because everybody is working on the further themselves, the are all trying to take as much money as they can add to current oil prices. If you can turn profit on your creative then do it now as fast as you can; that's the current mindset. That leaves many expensive producers such as the Canadian oilsands on the outside looking in. This means apart from a catastrophe in the major oil regions, the price is likely to be depressed for a very long time and perhaps we should get used to new lows we are used to seeing 20 years ago. not only is demand diminished, the production is increasing globally. If you recall in the 1970s as many cried the end of oil production (because peak oil had been reached), the sky hasn't fallen. Once again the simplest answer is about should be looking at. The reason why we haven't hit peak oil, and may never, is because technology continues to improve meaning we can extract more oil from existing resources, existing resources wind up being bigger than we originally thought, and we keep finding new oil. What's more likely to happen, run in the scarcity of oil, as the production of a new energy that Is cheaper than oil. It's also conceivable that the clean energy sources will be ones that developed nations choose to develop and invest in. So get used to lower oil prices and hopefully you're economy is not dependent on the oil sector. It's your stay.
Posted by brit at 9:01 PM