They will rise and fall. Maybe a dollar, maybe more. We can be quite
certain from past data that the price will fluctuate (rise and FALL).
That answers the question you asked.
What I think you were getting at though is why will the oil price drop
below a certain level (say, 40 US$) or at least come down, rather than
stay around 50 US$ or rise.
Based on the way things are going there are a few factors in the oil price game:
China -- they will be needing more and fast. They can't keep up with
their oil industry as it is not a "maintainance" mentality. They drill
a well and it might produce for a year, maybe 5, then it peters out.
They generally aren't thinking long term with their reservoir
exploitation strategy and instead are going for the quick & cheap
barrel (or 10 thousand barrels) of oil
LNG -- Liquid Natural Gas is making some heavy inroads as a fuel
source. This is cleaner and cheaper to get at, but more costly to
process. There are some areas that can get gas via pipelines, but with
the onset of LNG plants and tankers there are suddenly a bunch of
providers in remote parts of the world that would be ruled out if
pipelines were the only solution.
Politics -- If Venezuela sorts itself out the oil price will go down.
More Politics -- Iraq
Yet More -- Iran
Economics/Politics/Trust -- Russia is a major holder of oil and gas
reserves. They haven't had the long term interest in their economy to
go after the stuff that requires large initial investment. The tide is
turning and the big oil companies are investing heavy. It will take a
while for this to have a major impact.
There are about 750 million other factors, but I think you can see
that there is no guarantee of anything in the oil price.
Suggested reading : "The Prize" & "The Color of Oil"
-RR |
