Thursday, February 15, 2007

Where oil and gas prices are headed

I had written a post on non-sense associated with assigning blame for gas price changes here. I found an interesting article that talk about how much oil there really may be in the world in the National Geographic news. The author talks about how little of the world we have actually explored for oil and gas reserves and how technology allows us to recover more and more of what is actually available. This is similar to what Paul Pilzer talks about which I discussed here.

The point of the article is that cheap oil is not going away any time in our lives. The price will fluctuate based on changes in supply and demand causes by "risk premiums" commodity traders build into future expectations as well as economic growth rates. Don't be surprised if the price of oil either goes down to $10/ barrel or up to $100. Either scenario is likely and it has nothing to do with oil company greed.

If the situation in the Middle East calms down and the US continues to build alternate energy sources (like nuclear plants) I would expect oil prices to drop in half in the next couple of years.

2 comments:

j said...

Sorry charlie, 'cheap oil' is ALREADY gone. The only question is how far it goes. You think you'll see $30/bbl ever again? DREAM ON!!

Paul said...

I think oil is more likely to go to $30/ barrel than $100 in the next 5 years - maybe sooner. A Chinese recession would do the trick.