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

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)

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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.

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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