Will the Oil Boom End Soon?
July 08, 2008
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First, a hat tip to FoolYap over on the Peak Oil Party discussion board for directing me to this article.
About half way down the article, take a look at the table showing net exports. That tells the whole story about why oil prices have increased so much over the past 3 years. The most important data point is that the #1 exporter in the world, Saudi Arabia, is showing substantial declines in their export capability. In 2005, their average daily exports were 9095 Mbpd; in 2007, their average daily exports had fallen by MORE THAN A MILLION BARRELS PER DAY to 7923 Mbpd.
So, for people hoping for a crash in oil prices aka 1986, here is what the author of the article has to say...
Critically, Saudi Arabia appears now unable to perform the role of market stabiliser that it played from the 1980's until the 2000's on the basis of its known ability to pump up to 20% extra volume at short notice. Depletion of Saudi Arabia's giant oil fields appears to have taken away its ability to help the world in this way, though the Saudis will not directly admit they no longer have this power.
It seems likely that since 2007 OPEC has lost effective cartel power because few of its members have the ability to pump more oil. This means the cartel as a whole can do practically nothing to bring down prices even though key members like Saudi Arabia have much of their wealth tied up in Western economies and are clearly concerned about damage to their own interests if oil prices go any higher – thus the Saudi conference held on the 22nd of June 2008. There might be a short-term drop in oil prices, but it will never be below $50/barrel again. Not until we don't need it anymore.
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