RE: RE: RE: RE: RE: Economy needs Lower Oil Prices
If You have read a little history, You should know.
What happened in 1991, beside the retreat of Saddam from Kuwait?
Well, the Soviet Union collapsed. And with that a large part of the demand for Soviet/Russian oil.
But Russia still had lots of capacity of $20 oil to sell. And they continued to produce and sell, Yes to Europe and US. This coincided with the boom in north sea, which peaked around year 2000. That is why the price og oil was depressed throughout 90s. By early 2000s, the continually increasing demand, now with China and India as emerging demand-drivers, increasing growth in demand from 1.4% yoy in 90s, to 1.7% yoy up until 2007. And from 2000 to 2008, the oil price exploded from low $20s to $111 in 2008, which had a marked influence as a trigger for the crisis to follow.
Now in 2012/13, Russia is leveling off on its oil producing capacity at 10.3 mbpd, aboout the same level the Soviet Union ended its existence fo in 1990-91. There is no more capaclity to be had from Russia, they admit it themselves. The question is - for long will they be able to keep the plateau production? Yes, they probably have shale oil - also. But this will not be any $20 oil, it will be $80+ oil.
So, what about the Saudi's?
Yes, they have spare capacity. They recently announced the opening of their last megafield, Manifa.
As a 0.9 mill bpd field, this should make inroad in spare capacity wouldn't You think?
The Saudi's think not. They plainly states it will replace "natural decline" in they other aging fields.
From number released, this only males up about 3 years of net decline, about the time it took to construct Manifa. And there will not be a second. This is the last "elephant".
My conclusion is: it is difficult to accurately predict the oil price the next month, the next half year or year, but it is easier to determine the trend the next 10 years. Beside a full blown worldwide depression, the trend must be up. There is no alternative to oil as transport fuel, and the 2 more billion of people we expect to see in 2050 also wants part of the prosperity that consumption of oil produce.
And Fed, BoJ, BoE and soon to come ECB's money printing will make oil price more expesive in nominal $s (though maybe not in real terms).