(Bedminster, 13.6.2012)
Anyone hoping for petrol/diesel prices to fall (ever) should read the following piece by Bill Bonner, which covers the current oil price situation. It appears that the minimum price producers now expect (and indeed need) is around $100 a barrel. This reflects the fragility of their economies and also, of course, the extraction cost of what is, in reality, mainly still cheap and easily-obtainable oil.
Another interesting point covered is that the Falkland Islands may have an 'oil bonanza' of 1 billion barrels under the water. Years worth many seem to think, but at current consumption levels (86mbpd) will last 11.62 DAYS.
I sense hysteria rising, with the completely unachievable aim of cheap petrol at the pumps being around the corner to rescue our growth-free economies still being the hope of many, and what are, in global terms, tiny dribbles of oil being regard as somehow a game changer. Bear in mind that Peak Oil advocates have been saying for years that price volatility on this sort of scale will be a big signal that the peak has probably been passed.
More news: What’s going on with oil?
The price of a barrel of crude oil has plummeted some $30 or almost 25% in the past few months. And it’s got the world’s major oil producers in a panic.
Countries like Libya, Saudi Arabia, Ecuador, Iran, Russia and Venezuela need high oil prices. Otherwise, they can’t balance their books – something we know a lot about in the UK and Europe.
According to colleague, Byron King, these oil-rich countries require prices of at least $80-100 (or more) “just to have sufficient income to run their national budgets”.
So now the pressure is on from OPEC producers for Saudi Arabia to cut oil output to prevent a further slide in crude prices.
Reuters picks up the story:
Price hawks in the Organization of the Petroleum Exporting Countries are fretting that slowing economic growth will send crude, already off $30 since March, plummeting further.
"We think that given the economic situation, above all in Europe, there is a serious threat that prices might fall drastically and so our policy is to defend the production ceiling agreed in December of 30 million barrels a day," said Venezuelan Oil Minister Rafael Ramirez.
“I am afraid of this fall, anything below $100 is very painful for Libya,” said Libyan Oil Minister Abdulrahman Ben Yazza. Brent crude traded at just over $97 a barrel on Wednesday having peaked this year at $128 in March.
A moderate on oil prices, Saudi Arabia initially floated a proposal to lift OPEC's output target. After Riyadh quickly dropped that idea, the 12-member group looks set at a Thursday meeting to leave its formal production ceiling unchanged at 30 million barrels daily.
But extra oil from Saudi boosted actual output to 31.6 million bpd in May, a production rate in excess of demand that is building world inventories rapidly.
A report from OPEC estimated inventories rose by 2.1 million bpd on average in the first quarter of the year during a seasonal period when stocks normally decline. Supply and demand data suggests a build on a similar scale in the second quarter.
“In the face of such gloomy uncertainty OPEC should be discussing production restraint on Thursday,” said David Hufton of London oil brokers PVM.
Saudi Arabia, the world’s only major swing producer, finds itself in the tricky position of trying to plan cover for supplies lost from Iran when an European Union oil embargo starts on July 1 without sending prices crashing.
Its preferred oil price is $100 a barrel, a price it feels permits oil investment without hurting economic growth, while most in OPEC want to defend $100 as a price floor.”
*** Meanwhile, the hunt for oil goes on. These short-term supply issues are unlikely to change the big, long-term picture: the world is running out of oil. Most of the easy-to-get-at oil has been got at. Now we need to work harder to get to what’s left.
The price of a barrel of crude oil has plummeted some $30 or almost 25% in the past few months. And it’s got the world’s major oil producers in a panic.
Countries like Libya, Saudi Arabia, Ecuador, Iran, Russia and Venezuela need high oil prices. Otherwise, they can’t balance their books – something we know a lot about in the UK and Europe.
According to colleague, Byron King, these oil-rich countries require prices of at least $80-100 (or more) “just to have sufficient income to run their national budgets”.
So now the pressure is on from OPEC producers for Saudi Arabia to cut oil output to prevent a further slide in crude prices.
Reuters picks up the story:
Price hawks in the Organization of the Petroleum Exporting Countries are fretting that slowing economic growth will send crude, already off $30 since March, plummeting further.
"We think that given the economic situation, above all in Europe, there is a serious threat that prices might fall drastically and so our policy is to defend the production ceiling agreed in December of 30 million barrels a day," said Venezuelan Oil Minister Rafael Ramirez.
“I am afraid of this fall, anything below $100 is very painful for Libya,” said Libyan Oil Minister Abdulrahman Ben Yazza. Brent crude traded at just over $97 a barrel on Wednesday having peaked this year at $128 in March.
A moderate on oil prices, Saudi Arabia initially floated a proposal to lift OPEC's output target. After Riyadh quickly dropped that idea, the 12-member group looks set at a Thursday meeting to leave its formal production ceiling unchanged at 30 million barrels daily.
But extra oil from Saudi boosted actual output to 31.6 million bpd in May, a production rate in excess of demand that is building world inventories rapidly.
A report from OPEC estimated inventories rose by 2.1 million bpd on average in the first quarter of the year during a seasonal period when stocks normally decline. Supply and demand data suggests a build on a similar scale in the second quarter.
“In the face of such gloomy uncertainty OPEC should be discussing production restraint on Thursday,” said David Hufton of London oil brokers PVM.
Saudi Arabia, the world’s only major swing producer, finds itself in the tricky position of trying to plan cover for supplies lost from Iran when an European Union oil embargo starts on July 1 without sending prices crashing.
Its preferred oil price is $100 a barrel, a price it feels permits oil investment without hurting economic growth, while most in OPEC want to defend $100 as a price floor.”
*** Meanwhile, the hunt for oil goes on. These short-term supply issues are unlikely to change the big, long-term picture: the world is running out of oil. Most of the easy-to-get-at oil has been got at. Now we need to work harder to get to what’s left.
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