11/14/2004

Cheaper Oil?

Timothy Guinness and Tim Evans both agree that the price of oil per barrel will drop within a year but they have differences on what will happen in five years. Guinness thinks that oil will shoot up to $100 per barrel and Evans believes it will stay the same. Evans' arguement is quite interesting and is based upon supply and demand. Evans' beliefs are based upon econonomic pressure, low costs, and incentives to find more oil.

Economic Pressure. Oil companies need to maintain their stock prices and do that by finding more oil than they use, proving to Wall Street that they have a viable future.
Low Cost. The cost to recover oil is around $7 to $9.
Better late than never. One oil company isn't in a rush to find new resources because they know they can last for 20 more years and they don't want to invest to find more resources when it isn't a demand for them now.

There is also sweet crude and sour crude. Sour crude oil, which is a little more difficult to process is getting easier as companies learn how to refine it. So, the supply of usable oil will grow. Who knows what the price of oil will be like by 2010 but Evans does provide another way of looking at the long run.

4 comments:

Bryce Larkin said...

During the 70's analysts said that oil prices would go through the roof and only the rich would be able to buy. If we don't find any more oil this could be the case but the past has shown that industries will find a way.

stevepadilla2 said...

The world oil supply is unknown; however, geologist can conclude that the oil resources are being deminished faster then they are being replentished. The recent hike in prices are not do to a lack of supply, but because of an increase in demand. I think that as long as prices are sustained or even raise the supply of oil will be there. If a decline in prices start occuring less supply will be available again driving up price. In the long run however as resources deminish supply will go down causing prices to increase substantially.

Maudi said...

The price of oil is based upon availability, or so it used to be that way. I feel that the oil industry has become somewhat corrupt and that there is a lot of colluding going on. Oil companies have formed cartels that allow them to keep the price of oil high. The issue in Iraq has also given them someone to blame. I feel that we as Americans are not being told the truth. I also feel that if Americans would stand up to the enviromentalist there would be a lot more oil available thus lowering the price of oil.

Dr. Tufte said...

-1 for spelling mistakes on StevePadilla2's comment.

I'm tired of writing about oil (no offense).

So, let me change the subject.

The most important commodity in the world is not oil, it's cement. Look around you: how many oil based products do you see, and how many cement/concrete based products do you see?

Cement has also gone though a big price run-up this year. Higher oil prices are bothersome, but they aren't slowing anyone down. But there are actually shortages of cement in some parts of the U.S., and the world - real honest-to-god shortages, with excess demand, lines, and all the rest.

Has it ever occurred to anyone that ... just maybe ... we have a hang up about oil that is unhealthy?