The Coming Oil Shock?

Just watching Matt Simmons in TV. He published a book 3 years ago when oil was at $30 saying that oil is going much higher. Hiss views on peak oil are not completely absurd.

I don't know where oil is going, but here are the reasons why it may be going higher:

1) Saudi Arabia is running out of oil.  They have been convinced by the big oil companies for 40 years that their supplies are unlimited as they are extracting less and less oil every day.  Their supplies are not indefinite - in fact they are running out.

2) There is rising resource nationalism in Venezuala, Russia, China, India and Brazil.

3) There may be endless supplies of oil under the ocean, but we cannot access it.  There are a limited number of rigs and limits to the depths that technology can go.  Petrobras has tied up all of the big rigs for years. 

4) We are not yet becoming more efficiencies.  Even if we were to create dramatic efficiencies quickly, Chinese demand alone would soak up these efficiencies overnight.

I am not an expert.  Like most, I hope that all of those professing doom and gloom are wrong.  I am no longer sure they are.

 

 

Jason Rodgers
Jason Rodgers: Jason Rodgers was an experienced research analyst for a major bank prior to retiring to run his own investment consultancy in beautiful Lihue, Hawaii. Jason contributed articles to BestCashCow from 2008 to 2014.

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Comments

  • OilWillGoDown

    May 30, 2008

    Oil up to $130 is pure speculation. The energy department just came out today with reports that oil supplies are up at the same time that demand was down in Q1 from a year earlier. This is a classic bubble. The only difference is that there is plenty of supply but the speculators have convinced everyone we are running out of oil. Here are three reasons we won't:

    1. There is more oil locked in oil shale in Canada than in all of Saudi Arabia. It costs $30 per barrel to extract this.

    2. Higher prices will increase efficiency. Efficiency projects that were marginally profitable before are now much more so and watch them get done.

    3. Watch nuclear power and other alternatives thrive in this high price environment.

    Oil will be below $100 per barrel in six months - guaranteed.

  • Sol Nasisi

    May 30, 2008

    Oil has started to fall and according to the Wall St Journal and Reuters the government is looking into possible market manipulation. I also believe oil will come down significantly in price shortly.

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