Here's a very good article that summarizes many facts that I'm already aware of, so I highly recommend it. I have highlighted the more important points :
REALITY BITES
by Puru Saxena
Hurricane Katrina ripped through the Gulf of Mexico causing oil prices to
reach another record-high of $70 a barrel.
Over the past seven years, crude oil prices have risen almost seven-fold!
In December 1998, crude traded at roughly $10.5 per barrel and recently it
recorded an all-time high, over $70 per barrel.
What is amusing though is that during the entire course of this massive
advance, the majority of analysts, politicians and OPEC officials have
consistently called for a top in the oil price! So far, the experts have
been proven wrong.
In the meantime however, oil has continued to surge. The problem for the
establishment is that the price of oil is dictated not by officials, but
by supply and demand. It is this dynamic that is now pointing towards a significantly higher oil price.
The last time crude oil prices went through the roof was in the 1970's. In
late 1973, there was political unrest in the Middle East and the result
was an oil embargo imposed by OPEC. This caused oil prices to soar from $2 a barrel earlier in the year to over $10 a barrel in December 1973. The
oil crisis stunned the world and America was caught totally off-guard. The
Iranian Revolution in 1980, when Iranian oil production came to a
standstill, followed this event. Due to this further disruption in supply,
oil prices exploded higher and recorded their all-time high at roughly $40
per barrel. Adjusting for inflation (in today's dollars), oil had in fact
peaked at $90 a barrel in 1980!
So, it is worth noting today that it was largely supply, which caused oilconan wrote:History always repeats itself. This (above), could happen again.
prices to rise twenty-fold in the 1970's.
In the early 70's, American oil production was peaking, a fact which was
largely unknown at that time. A legendary scientist by the name of King
Hubbert had predicted in 1956 that the United States would peak as an oil
producer during this time. Back then the experts did not take Hubbert
seriously. After all, America had been the largest oil producer for the
past 100 years. In 1970, American oil production hit a record-high of 9.6
million barrels of oil per day. Academics dismissed Hubbert as a whacky
scientist, not realizing that 1970 was indeed the year when oil production
peaked in the United States! By the end of that decade, America was
replaced by Saudi Arabia as the world's largest producer of oil - and it
has stayed this way ever since.
Now, let us return to the current situation. Why has oil surged - and
where is it likely to go in the years ahead? For this, let us turn to the
primary drivers - supply and demand.
Supply is extremely tight, OPEC is already pumping close to capacity and
most of the major oil provinces are well past their peak output. It is a
known fact that once major oil fields hit peak output, their production
rates decline significantly. Such fields are then able to produce oil for
years to come, but at a greatly reduced rate.
The last major oil provinces were discovered between 1967-68 in Alaska,
The North Sea and Siberia. Alaska peaked in the 1990's, and its peak
output was 2 million barrels per day. It now produces 900,000 barrels per
day. The North Sea peaked in 1999 at 6 million barrels per day. Current
production is down by 25%. Siberia peaked at 9 million barrels per day. At
present, it produces 5 million barrels per day. As mentioned earlier,
America peaked in 1970-71 and current output is only a shadow of its
record-high. Furthermore, according to Chinese and Mexican officials,
their own biggest oil fields Daqing and Cantarell respectively are also
close to their peak output. The ensuing decline from these two fields
alone will create a shortfall of 1.8 million barrels per day!
Let's face it; our world now depends heavily on Saudi oil. The Saudis
claim that they have 260 billion barrels of proven oil reserves and their
oil fields are capable of pumping 15-20 million barrels of oil per day.
But, will the Saudis be able to deliver when oil demand rises in the years
ahead? For the answer, let us examine the Saudi claims.
Up until 1979, the Saudi oil company "ARAMCO" was owned by major foreign
oil companies. In 1979, just before Saudi Arabia removed the foreign
interest and nationalized ARAMCO, a final audit of Saudi oil reserves was
conducted. The study revealed that Saudi Arabia had 110 billion barrels of
proven oil reserves. Then, in the mid-1980's, soon after ARAMCO was
nationalized, Saudi proven oil reserves miraculously jumped by 150% to 260
billion barrels! Nobody knew how this happened and it is highly
questionable, considering that the last major Saudi oil field was
discovered in 1968! How the Saudis manage to boost their proven reserves
by 150 billion barrels since taking over ARAMCO is still a mystery. To
complicate matters further, for the past 25 years, Saudi proven reserves
have remained constant at '260 billion barrels'. How can Saudi reserves stay
the same at '260 billion barrels' when it has pumped almost 60 billion
barrels of oil since 1980? This is one question, which begs an answer.
Next, let us closely examine Saudi Arabia's oil production capacity, whichconan wrote:Saudi Arabia has already issued an official statement that in a couple of years fron now, it will not be able to meet the world's demand anymore. Why? Because they know the truth about their current reserve, and it's a bitter one.
seems to have mystified the world. The majority of people believe that
Saudi Arabia can keep supplying the world with endless quantities of crude
oil. In fact, the reality may be very different. Not many people realize
that over 90% of Saudi oil comes from only six oilfields, which were all
discovered before the 1970's. So, all these fields are now extremely old,
and experts argue that they are now well past their prime. Ghawar oilfield
is the super -giant and has provided 55-60% of Saudi oil over the past
five decades! According to experts like Matthew Simmons (The White House enery advisor), Ghawar is past
its peak already and likely to enter into a major decline.
Global demand for oil is another story altogether. Paris-based
International Energy Agency (IEA) estimates that in the fourth quarter of
this year, demand will hit 86 million barrels per day, a record-high.
Asian demand for oil is rising fast and is expected to double within the
next 8-10 years. Over time, we can expect the emerging economies to
consume a lot more oil than the industrial world - a fact that can't be
disputed due to the sheer population numbers in developing countries. What
will happen when the Asian demand for oil doubles to almost 40 million
barrels a day in a few years time? Where will these extra 20 million
barrels come from? This excess demand will most probably be tackled not by
increased supply, but by significantly higher prices.
Regards,
Puru Saxena
Editor's Note: Puru Saxena is the editor and publisher of Money Matters,
an economic and financial publication NOW available at http://www.purusaxena.com
An investment adviser based in Hong Kong, he is a regular guest on CNBC, BBC World, Bloomberg TV & Radio, NDTV, RTHK Radio 3 and writes for several newspapers and financial journals.
conan wrote:Mengapa begitu demand sedikit melebihi supply, harga langsung melonjak drastis? Jangan salah, minyak bumi tidak seperti komoditi lain. Tidak ada pengganti untuk minyak bumi. Dan semua negara, semua manusia, membutuhkan minyak bumi. Jika supply kurang dari demand, semua negara akan berebut jatah yg bisa mereka beli.
Harga minyak bumi tidak bisa ditawar seperti di pasar. Negara penghasil minyak bumi akan menjual ke siapapun yg bisa membayar harga yang mereka patok.
Contoh jika harga minyak naik menjadi $100 per barrel, dan Indonesia tidak lagi punya uang cukup, sementara negara lain seperti China dan USA punya, mereka akan memborong minyak bumi sebanyak2nya untuk mengamankan stok domestik mereka masing2, dan negara penjual minyak tidak akan mau membela jatah Indonesia bila kita tidak punya uang, mereka akan menjualnya pada pihak yg bisa membeli sebanyak mungkin dengan harga setinggi mungkin. Dan hal ini akan menyebabkan harga naik lebih tinggi lagi!
Selisih sedikit saja antara supply dan demand, bisa menyebabkan harga naik sangat besar, karena minyak bumi tidak tergantikan oleh barang lain, semua negara berebut jatah pembelian, and the highest bidder wins!