“What is disturbing here is that things seem to get worse, not better,” an analyst at Goldman Sachs, David Greely, said. “These high prices are not attracting meaningful new supplies.”
That’s because there isn’t any extra supply waiting for higher prices in order to become profitable. Demand is way ahead of supply, and this is made much worse by massive speculation and manipulation in the futures markets. It’s a classic bubble.
And like any bubble, it will eventually pop. However, were $200 a barrel oil to become a reality, world markets would be in disarray and it’s a given there would be serious social unrest, if not actual riots.
Are these guys really all morons??
Apparently they think higher demand must always lead to new supply because that’s what the theory says.
Eventually higher demand will lead to lower consumption– in fact it baffles me that no auto manufacturer has yet introduced a car that gets better than 100 mpg. The tech is already market-ready. Why is it relegated to aftermarket add-ons for rich folk?
BTW, in many countries, a gallon of gas costs 2 days pay. We’re a long way from that kind of pain!
These things come in cycles. It’s quite likely that we’ll get to $200/barrel, but it’s just as likely that the oil price will fall sharply later in the cycle. Citigroup has said prices may fall to $40 a barrel within two years. The drilling cost for oil and gas wells has actually fallen slightly over the last two years, and even deepwater rig rates have been flat after jumping five-fold since 2004. Some 65 deepwater rigs are coming on stream over the next two years, compared to 10 from 2002 to 2007.
I’m not looking forward to $200/barrel, but the retreat to $40 sounds good…