I was watching Market Place Middle East (MME) on CNN and there was a segment there discussing on what the ideal price of Oil should be. Known as the Goldilocks of Oil Prices because it is neither hot nor cold, but just right and palatable for both producer and consumer. Same as the porridge concept in “Goldilocks and the Three Bears.”
Basically a price less than $50/barrel is not feasible for Oil Producers because it will hit their profit margins and discourages oil producers from investing in newer oil exploration projects.
Lack of investment in newer oil wells will result in rapid spikes in oil prices whenever demand starts to over take supply. I remember this was one of the reasons stated by experts on why there was a rapid jump in oil price in the late 90’s, because the low oil price of the 90’s resulted in lack of investment in newer oil wells and the existing oil wells just started to run dry. Developing new oil wells takes considerable time too, so oil production cannot ramp up so easily to meet the demand.
Here’s the kicker though, it was also said in the report that a price higher than $90 could encourage economies to adapt renewable energy technologies to power their economies.
So basically anything between $50 and $90/barrel would be the sweet spot for Goldilocks Oil. Makes much sense now why Saudi Arabia was calling for a barrel price of $75 for each OPEC member.
I think it’s already a little bit late for that kind of thinking, of Oil greater than a $100. Ok so maybe we’ll see that soon in a year or two once the world economies pick themselves up from the credit crunch and growth and consumption starts going up again. But if we play our cards right and stay on course in adapting renewable energy, we might not have to be worried anymore about the price of oil.
Yep I look forward to the day when we no longer have to fear every little bit of absurd news that could send the price of oil skyrocketing; be it rebels in Nigeria, hijacked tankers, blown up piping or hurricanes in the gulf. Energy is a commodity that no country should have a monopoly of.
Category: Oil, Clean Energy, Oil Price
