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| Predictions of $250 a barrel on fears for oil reserves |
| 2009-06-11 |
| The price of oil burst through the $71 a barrel mark today amid revelations that proven reserves had fallen for the first time in 10 years and predictions that the price could eventually hit $250. The latest high – from lows of $30 only four months ago – came on the New York Mercantile Exchange, where the cost of July deliveries rose by $1.35 to $71.36. This comes on top of a $2 rise the day before as investors rushed into the market on the back of lower stockpile figures, higher demand estimates and speculation against further falls in the dollar. "I wouldn't be surprised if we're testing $80 in a week or two," said one analyst, while BP's chief executive, Tony Hayward, questioned whether $90 could be the "right" value. Kuwait's oil minister, Sheikh Ahmad al-Abdullah al-Sabah, put some of the rise down to signs of recovery in Asia but warned that overall demand was still weaker than last year. Opec would not raise supply at current oil prices but did not rule it out "if it reached $100", he said. Alexei Miller, chairman of the Russian energy group Gazprom, raised the stakes further when he reiterated last year's estimates of $250 a barrel. "This forecast has not become reality yet, given that the [credit] crisis gained momentum and exerted a powerful impact on the global energy market. But does this mean that our forecast was unrealistic? Not at all." The latest surge has also raised fears that higher energy costs could snuff out the nascent economic recovery. Shares on Wall Street's Nasdaq index fell 1%. The febrile atmosphere in oil markets was fed by the publication of BP's Statistical Review of World Energy, which showed that the world's proven crude reserves had fallen by 3bn barrels to 1.258tn by 2008 from a revised 1.261tn in 2007. Declines in important producers such as Russia and Norway offset rises in new areas such as Vietnam, India and Egypt. The figures did not include Canada's tar sands, which are put at 150bn barrels. The drop is partly attributed to a drop in exploration drilling due to the precipitous fall in oil prices last year but also to the end of "easy" oil. Conflict this week in the Amazon and speculation about Arctic drilling underlined how oil companies are pushing into environmentally sensitive places to find new reserves. Tony Hayward, BP's chief executive, insisted there was enough crude to last 42 years at current consumption levels, roughly the same as last year. Adherents of "peak oil" – the theory that the maximum rate of oil production has been reached – believe supplies will run out much sooner because of growing demand. The BP boss said: "Our data confirms that the world has enough proved reserves of oil, natural gas and coal to meet the world's energy needs for decades to come." Higher prices allowed companies to invest in finding further reserves while not choking off demand, he said. "There is a rational argument to say that somewhere between $60 to $90 a barrel is the right sort of level," he said. Global oil consumption fell 0.6% to 81.8m barrels a day in 2008, the first decline since 1993 and the largest drop for 27 years. North Sea output dropped 6.3% to its lowest level for three decades. By contrast, gas use rose by 2.5% globally and 16% in China. The use of coal, the heaviest emitter of climate-changing carbon, rose 3.1%, with Chinese demand up 6.8%, leaving it with a market share of 43% despite more high-profile announcements about its commitment to renewables. BP says it is difficult to compare "primary" carbon fuels with renewable sources of electricity. BP notes that globally solar capacity rose nearly 70% and wind by 30% year on year but says renewables only generated 1.5% of global electricity and therefore began at a low base.But it notes these sources are playing an increasingly important role in some countries with wind power providing 20% of total electricity generation in Denmark, 11% in Spain and 7% in Germany. Despite the 2008 rise in coal consumption, the BP data showed growth in the use of the fuel continued to decline compared with 2007 when it rose 5% and five years ago when it went up by 8%. But the coal figures will alarm environmentalists and increase the calls for companies and governments to speed up trials on "clean coal" technology and the use of carbon capture and storage. China has promised to increase its use of renewables: Zhang Xiaoqiang, vice-chairman of the China's national development and reform commission, says the country may produce as much as 20% of its energy from wind and solar by 2020. |
| Posted by:GolfBravoUSMC |
| #11 1.258/(1.261-1.258) => only 419 years Febrile, indeed. Pump and dump, I say. Where's my $60 tariff floor? |
| Posted by: KBK 2009-06-11 22:02 |
| #10 I thought there were new in-situ oil shale technologies that worked out to the 80/bbl range and didn't use much water? |
| Posted by: Thing From Snowy Mountain 2009-06-11 21:23 |
| #9 Combination of factors. Supply is decreasing due to the high cost relative to price of adding new supplies. Asian demand (& others?) has recovered somewhat. Currency exchange rate reflects inflationary US debt increases. And some more speculation is going on. Tankers of oil are being held off the market - call it floating storage - on a bet that prices will go up faster than ship lease bills (not a terribly bad bet right now, as low as tanker rates have gotten.) Oil shale is not even an option at less than about $100 per barrel unless we invent more efficient ways to get it - and that's not even considering the environmental and water use costs. My guess - over $80 and global economic activity collapses to drive the demand and price down, under $40 and the 'cheapness' drives demand and price up; long-term smoothed-out average would be $60 now plus 3-5% per year. Above and beyond inflation. Eventually it will make $250 per barrel, fo' sho'. |
| Posted by: Glenmore 2009-06-11 20:23 |
| #8 Goldman Sachs Speculation |
| Posted by: GolfBravoUSMC 2009-06-11 16:17 |
| #7 I agree on the currency portion of pricing. When prices were sky high last year the dollar was $1.90+ to the pound. We got to $1.40+ to the pound earlier this year, but now we're back to $1.64 to the pound. There is also massive speculation by Soros, Goldman Sachs and their ilk. |
| Posted by: GolfBravoUSMC 2009-06-11 16:15 |
| #6 This is a currency issue layered on scarcity concerns ed, the shale reserves wouldn't help much this time. |
| Posted by: AzCat 2009-06-11 15:21 |
| #5 no one seems too notice that gas and oil shot up RIGHT after Nobama went too Saudi Arabia! |
| Posted by: funky skunk 2009-06-11 13:36 |
| #4 Pump-n-dump. Keep talking it up, boys, maybe it'll get to $500/barrel. |
| Posted by: Anguper Hupomosing9418 2009-06-11 13:28 |
| #3 I'll be happy to sell you as much oil as you would like for $250. Special sale this weekend only, oil for $199! |
| Posted by: Richard of Oregon 2009-06-11 13:18 |
| #2 ...amid revelations that proven reserves had fallen... I suspect there's a corollary with banning further exploration in many areas by the usual suspects. Can't 'prove' something if you can't look. |
| Posted by: Procopius2k 2009-06-11 13:01 |
| #1 And yet the US has 2 trillion barrels of recoverable oil in shale rock and 200 years of coal production. Actual production - zero. Oil shale economics Coal liquefaction economics Instead our leaders choose for Americans to be batted around like ping pong balls and have our economy destroyed while transferring incredible riches to those who want us enslaved or dead. |
| Posted by: ed 2009-06-11 11:55 |