Reverse Bubbleomics: What If OPEC Figures Out Crude Oil’s Fair Price is $150?

[Subdivisions]

Well, about a year ago, OPEC said it needed a price of $75 per barrel for oil in order to make production profitable. Then, a couple of months ago they said they needed to up that to $100 per barrel - at which point the price of oil began to move from the $75 neighboorhood toward $100 and is currently at ~$85 per barrel. All of this was predicted years ago as a consequence of the peaking of oil production and is known to anyone who has bothered to watch it. The end of cheap oil is now two years into our past.

The International Energy Agency (IEA) recently announced their 2009 projection of when oil production would peak was changed from 2030 to 2020, although in a bemusing twist they said it would never ever exceed the peak that was reached in 2006 of 70 million barrels per day. Err…just a small point there; perhaps someone can help me out here? Like I’m not very smart, but the way I read that it looked to me like they were saying that “Peak Oil” was in 2006?

http://af.reuters.com/article/energyOilNews/idAFLDE6A70SK20101109">IEA sees oil supply peak looming, ups price view (OP note: Notice the Orwellian use of the words "peak in supply", rather than "peak in production". This has been previously noted by the oil-watching community to be a distraction from the truth, which is that is it PRODUCTION that has peaked, not supply)

...snip...

They also predicted $100 oil by 2015 and $200 by 2035 although they don’t say how they calculated that. But if you assume (a) that the share of GDP that will be spent on oil is constant (b) that right now the price of oil is just right (according to the theory of Parasite Economics it is http://www.marketoracle.co.uk/Article10998.html) (c) broadly static production capacity over the next ten to twenty years, and (d) 5.5% global GDP growth (nominal), then you get to those numbers.

Except that oil demand is not elastic.

$147 oil in 2008 proved that, the price went up, demand was hardly affected, and then the players blinked. In that year USA spent $450 billion importing oil; if oil had cost $147 for a whole year they would have spent $750 billion. That makes QE2 look like chump-change.

...snip...



Notice how much of the oil that will keep the world ticking over is supposed to be going to come from “fields not yet developed or found”.

Now I wonder, would that be the expensive oil…or the cheap stuff? Perhaps that’s like for hardwood trees, the ones at the edge of the forest near a road are cheap to get out, then the further you go in, the more expensive that gets, and then you have to wait for new ones to grow.



http://www.marketoracle.co.uk/Article24199.html

Continuing with the forest metaphor, Spindletop in Texas was the hardwoods at the edge of the forest. BP's Macondo blowout represents the hardwoods deep in the forest. All the easy oil is gone and we're left with the hard-to-get-to oil that will continue to rise in price and which will cause severe oil shocks, recessions, depressions, and bloody wars. Then, some day soon, oil and oil-based products that we take for granted and those we don't, like gas, will be priced beyond what most people can afford.

But, not to worry. Rest assured, we WILL continue to run at full velocity, never once braking to slow down or to check the map, until we hit go right over the cliff at full speed. At which point gravity will take over.

And then you will live in a new world.

[Drale]

1. Oil was 150 dollars a barrel

and demand went down. I think they realize that the optimum price, that they can make ungodly amounts of money and the majority of people wont complain, or stop buying gas, is right where it is right now.

[Make7]

2. Other than Libya, what OPEC countries have even hinted at $100 for a target price? ( n/t )

www.thenational.ae/business/energy/opec-members-differ-on-oil-price-target

[Turbineguy]

3. Bush increased the price of oil.

The World paid 17 trillion dollars extra during his reign.

[Warpy]

4. We'll get double digit inflation which the talking heads in the employ

of the corporate plutocracy will tell us is all the fault of greedy workers who are making too much money.

It worked for them beautifully in the 70s.