Heading Out

Seeking the winds that help to sail on Shakespeare's tide.

Tuesday, February 08, 2005

Whither oil?

The latest news from Reuters would suggest that the world has passed through another oil turmoil, and that prices may soon fall back to around $30 a barrel. However, it must be noted that Venezuela continues to threaten the US oil ties and is also having some trouble in maintaining current production. Since that their President seems intent on shipping more to China, who would be glad to get it, that means there will be less of the 1.6 mbd of current supply that might be available to us before long. This will become more true as the Chinese adapt refineries to handle to heavy sulphur sour crudes such as the Venezuelans have, and the Saudi can supply from untapped reserves.

One must also note that Australia is now seeing a rapid drop from their peak production of 805,000 barrels a day in 2000, to the current level of 490,000 barrels with a further drop anticipated this year. These are folks, like the British, that have to replace that loss, since they are technologically advanced and must have the fuel for their economy. Thus even though the Saudi are maintaining production, other sources are dropping and demand will continue to rise, and so, with respect, I will disagree with BP's Chief Executive and doubt that we will see $30 a barrel oil again.

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