In the Oct 9 Issue of Newsweek, Leonard Maugeri (SVP at EniSpA) writes that we should expect further drops in oil prices. He attributes the previous months increase in oil prices to :
1. Pessimistic warning of the world running out of oil (Peak Oil).
2. Instability of supply from Iran and Nigeria.
3. Increasing demand for oil from China and India.
All of which are farther from the truth as he points out via these premises:
1. Asian demand (from China and India) is a myth, since China has the possibility to reduce it’s oil intake via: Constructed coal and hydro power plants finally coming online, The removal of government oil subsidies in China which encourage public oil consumption.
2. Lack of current supply is caused by a long period of low prices which discouraged the exploration of oil from Oil companies. He expects that in 2010~2012 oil supply will meet demand when these exploration projects finally bear fruit.
He does acknowledge however:
It is too soon to say whether all these elements are already reducing consumption growth below current trends. In the oil sector, short-term data remain poor, due to the lack of reliable statistical systems in most developing countries and imprecise information on oil inventories.
Then he ascertains:
If prices should drop significantly before the investments now underway reach the point of no return, they could come to a screeching halt, precipitating another price spike. Only a major recession could prevent this, by killing demand. Hardly comforting. But remember the main point: it’s not possible to forecast oil prices with real accuracy—so it’s not wise to place great stock in any one forecast.
Meaning, let’s hope that investors don’t chicken out and kill current oil exploration/development.
This article shouldn’t dissuade us from pursuing alternative energy. Because this still doesn’t solve the problem of global warming and the $60/barrel price that OPEC members are working to keep constant. And this is the only way to rid us from the grasp of oil producing cartels that dictate world oil prices. The money we can save from not importing foreign oil means that we are contributing to our countries economy by producing energy internally as well as generating jobs.
Original Article here
Category: Oil, Energy News
