Comment 40367

By A Smith (anonymous) | Posted May 05, 2010 at 04:53:06

Ryan >> Consider: global oil production has been stalled at around 85 million barrels per day (mbpd) since 2005.

In 1979 world oil supply was 66.9 Mbpd and it wasn't until 1993 that this level was reached again, even while world oil consumption grew from 63.1 to 67.4 Mbpd, or 6.8%. During this time period, oil prices fell from around $70 to less than $30 (2007 USD).

From 2002 to 2008, world oil supply went from 76.9 to 85.2 Mbpd, while oil consumption went from 78.1 to 85.4 Mbpd, but this time oil prices spiked.

The only thing that determines the price of oil are the actions of the buyer and seller of oil contracts. Even if supply is tight, if sellers are willing to sell at $30 per barrel, that will be the price. Similarly, even if there is plenty of supply, if sellers can convince buyers that oil is worth $130 per barrel ("we're running out of oil, buy before it's too late!"), that will be the price that we pay.

Chill out, stop listening to the experts and everything will work out just fine. In other words, have some faith.

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