CNNMoney.com today said low oil prices are behind us. Oil finally went above $50/barrel, raising $1.99 to $51.61/bbl. On February 12 my Huffington Post article speculated on whether crude could stay low (meaning $55/barrel or less) for another two years. The answer was yes and no.
To recap, oil cost $16/bbl (in current dollars) in 1998, the lowest it has ever gone. Let me repeat, the absolute minimum oil has ever been in current dollars was only eleven years ago. Yes, in 1972 before the first energy crisis oil sold for $2.85/bbl, but that would be worth $23/bbl today. Then oil went up to $147.27/barrel on 11July08, but dropped to $32.40/bbl on 19December08, a four year low.
No one of authority predicted either price. First, Goldman Sachs earlier in the year speculated oil jumping to $200/barrel, and the $147/bbl made them look like prescient. Then, as oil prices plummeted, they recalculated to a price of $100/bbl for December 2008. Well, they were off by a factor of three when oil dropped closer to $30/bbl.
The latest guesses are from the U.S. Department of Energy and Morgan Stanley, their combined average being $40/bbl for 2009 and $55/bbl for 2010. Go to that February 12 HuffPo for details. Then just yesterday (see my daily blog), NewEdge saw $55/bbl fairly soon. Why bother even reading experts, for my assessment is that they are sometimes right, but almost always wrong.
A commanding point, I think, is the break-even price (BEP) of oil, the cost from which a company or country begins to make money. While the Bank of Kuwait reports the BEP for Saudi Arabia to be $30/bbl, the International Monetary Fund says it really is $54/barrel. Further, the IMF indicates that the BEP for Iraq is $94/bbl and $90/for Iran. Oil from Canadian sands is also at around $54/barrel. All this is without any cap and trade or carbon tax.
The Kyoto Protocol mildly discussed (but did not agree on) a carbon tax of $348/ton carbon (4.74 cents/pound carbon dioxide), which would have added $43.50 for each barrel of oil. While a carbon tax is currently not being considered, if global climate heating is real and serious, and a 5 cents/pound carbon dioxide tax is ever enacted, then Saudi Arabia and Canada would only begin to make a profit if oil sells for more than $100/barrel. Iraq and Iran would need prices closer to $150/barrel.
This is why I say yes or no to $55/bbl oil in 2010. If you base on the best available government and private assessments, then, feel free sticking with that figure. If you are more attuned to the politics of oil, then something on the order of $100/bbl begins to look more probable, especially if any kind of global climate change surcharge begins to show traction.
To recap, oil cost $16/bbl (in current dollars) in 1998, the lowest it has ever gone. Let me repeat, the absolute minimum oil has ever been in current dollars was only eleven years ago. Yes, in 1972 before the first energy crisis oil sold for $2.85/bbl, but that would be worth $23/bbl today. Then oil went up to $147.27/barrel on 11July08, but dropped to $32.40/bbl on 19December08, a four year low.
No one of authority predicted either price. First, Goldman Sachs earlier in the year speculated oil jumping to $200/barrel, and the $147/bbl made them look like prescient. Then, as oil prices plummeted, they recalculated to a price of $100/bbl for December 2008. Well, they were off by a factor of three when oil dropped closer to $30/bbl.
The latest guesses are from the U.S. Department of Energy and Morgan Stanley, their combined average being $40/bbl for 2009 and $55/bbl for 2010. Go to that February 12 HuffPo for details. Then just yesterday (see my daily blog), NewEdge saw $55/bbl fairly soon. Why bother even reading experts, for my assessment is that they are sometimes right, but almost always wrong.
A commanding point, I think, is the break-even price (BEP) of oil, the cost from which a company or country begins to make money. While the Bank of Kuwait reports the BEP for Saudi Arabia to be $30/bbl, the International Monetary Fund says it really is $54/barrel. Further, the IMF indicates that the BEP for Iraq is $94/bbl and $90/for Iran. Oil from Canadian sands is also at around $54/barrel. All this is without any cap and trade or carbon tax.
The Kyoto Protocol mildly discussed (but did not agree on) a carbon tax of $348/ton carbon (4.74 cents/pound carbon dioxide), which would have added $43.50 for each barrel of oil. While a carbon tax is currently not being considered, if global climate heating is real and serious, and a 5 cents/pound carbon dioxide tax is ever enacted, then Saudi Arabia and Canada would only begin to make a profit if oil sells for more than $100/barrel. Iraq and Iran would need prices closer to $150/barrel.
This is why I say yes or no to $55/bbl oil in 2010. If you base on the best available government and private assessments, then, feel free sticking with that figure. If you are more attuned to the politics of oil, then something on the order of $100/bbl begins to look more probable, especially if any kind of global climate change surcharge begins to show traction.
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The Dow Jones Industrials dropped 86 to 7401 and oil went up $14/toz to $957.
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In the southern hemisphere, Tropical Cyclone Ken is far east of New Zealand and moving away, while what has quickly become a potential major storm, Tropical Cyclone Ilsa, is far west of Australia and moving away. Information is sketchy at this time, as wind speeds from 69 MPH to 115 MPH are being tossed around.
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