Saturday, December 13, 2008

The Price of Oil and Its Impact on Projects

There has been a lot of cheering in some quarters about the drop in oil prices. For some folks it appears that Peak Oil was overblown hype and they aren't shy about saying so. Well I am here to tell you that every silver lining has a cloud.

Commodity Online posted an interview with Mark Leggett, a Canadian oil and gas analyst. This interview should be required reading for all those who want to just Party On Dude!! He offers up understandable arguments on why low oil prices will boomerang against us, and makes the case for the end of the era of cheap, easy to get oil. He also suggests that gas at $4/gallon is the price point that makes most people look for alternatives.

Enjoy the low prices while they last, but don't expect them to last more than a year. Two years if we are really lucky, although I doubt it.

1 comment:

The North Coast said...

Many of the drilling and recovery projects that were to assure us of an ongoing supply of cheap oil, have been cancelled because prices for oil have dropped too low to make these projects profitable.

This means we will continue to deplete developed fields, and that the minute the economy begins to recover, demand will ramp back up again and drive the prices northward. It doesn't take much of a squeeze in supplies to jack the prices back to over $100 a barrell, as we have seen.