Energy / Oil Prices

• Peak Oil Price: The Latest Industry Worry

  There have been many calls on peak oil – the tipping point at which global production reaches a peak – and, due to dwindling reserves, production declines, even if demand continues to rise. In reality, the industry and the technology have proved more resourceful than predictions have allowed and production has continued to rise.Indeed, the recent opening up of tight oil reserves in the US heralds the possibility that the US may become self-sufficient in a number of years if rates of production growth continue.Yet in spite of this creativity on the part of the extraction industry in finding new…

• Why the High Oil Prices if Supplies Really are Abundant?

  It is a slick piece of public relations to convince people to disregard what is right in front of them and believe the opposite. And yet, that is what the oil industry has achieved with an oh-so obviously coordinated campaign to tell the public and policymakers that there is no need to be concerned about future oil supplies.Many people remember the price spike of 2008 which shot prices to an all-time high of $147 a barrel. Oil subsequently crashed all the way down to about $35 at the end of that year as a brutal contraction gripped the global economy.…

• How Low Wages can Lead to High Oil Prices

  In my view, wages are the backbone an economy. If workers have difficulty finding a job, or have difficulty earning sufficient wages, the lack of wages will be a problem, not just for the workers, but for governments and businesses. Governments will have a hard time collecting enough taxes, and businesses will have a hard time finding enough customers. There can be business-to-business transactions, but ultimately somewhere “downstream,” businesses need wage-earning customers who can afford to pay for goods and services. Even if a business produces a resource that is in very high demand, such as oil, it still needs…

• Analyzing Changes in WTI, Brent, and Gasoline Prices

  Here I comment on some recent developments affecting the prices of WTI, Brent, and gasoline.West Texas Intermediate is a particular grade of crude oil whose price is usually quoted in terms of delivery in Cushing, Oklahoma. Brent is a very similar crude from Europe's North Sea. As similar products, you'd expect them to sell for close to the same price, and up until 2010 they usually did. But an increase in production in Canada and the central U.S. combined with a decrease in U.S. consumption has led to a surplus of oil in the central U.S. This overwhelmed existing infrastructure…

• What's Causing the Price Gap between WTI and Brent, and Who will Benefit?

  The Street thinks oil price differentials stem from lack of pipelines. That's only partly true, says Keith Schaefer, editor of Oil & Gas Investments Bulletin, arguing that limited refinery capacity is just as big a challenge. Schaefer expects most investors to be caught completely off guard when the Brent/WTI gap widens and light oil prices plummet later this year, and in his nuanced interview with The Energy Report, he tells us who stands to profit, who stands to lose and why select natural gas companies are getting a lot of love right now. The Energy Report: There's been a lot…

• Obama Makes no Attempt to Curb High Oil Prices after Elections

  I guess the SPR Threat was politically motivatedWhen Oil and Gas prices were last at these levels President Obama utilized the threat of releasing the SPRs to put a lid on the rampant speculation in the oil markets. And yes with oil inventories at record levels here in the US, there is rampant speculation in the oil markets once again. The oil market is being pegged right alongside the S&P 500 almost tick for tick, regardless of overflowing supplies at Cushing, or large weekly builds in total US stocks. No more elections to campaign forPresident Obama and his advisors know…

• How High Oil Prices Lead to Recession

  There is ample evidence that spikes in oil prices leads to recession, at least in the US, which is an oil-importing nation. James Hamilton has shown that 10 out of the last 11 US recessions were associated with oil price spikes. How does this happen? An analogy can perhaps help explain the situation. This analogy also sheds light on a number of related economic mysteries:How can oil have a far greater impact on the world economy than its share of the world GDP would suggest? After all, BP’s World Energy Outlook to 2030 shows the world cost of oil is…

• Ten Reasons Why High Oil Prices are a Problem

  A person might think from looking at news reports that our oil problems are gone, but oil prices are still high.Figure 1. US crude oil prices (based on average prices paid by US refiners for all grades of oil based on EIA data) converted to 2012$ using CPI-Urban data from the US Bureau of Labor Statistics.In fact, the new “tight oil” sources of oil which are supposed to grow in supply are still expensive to extract. If we expect to have more tight oil and more oil from other unconventional sources, we need to expect to continue to have high…

• Why you should Ignore any Long-Term Forecasts of Cheap Crude

  Here's the short version of why forecasts of low long-term oil and natural gas prices are almost certainly wrong: It costs more than that to get the stuff out of the ground. Only two things could actually lead to low long-term prices: 1) Somebody could invent and deploy some genuinely brand new technology that makes it really cheap once again to get oil and gas out of the ground or 2) we could have a deep and grinding deflationary depression that brings demand for oil and natural gas down so much that prices collapse.The people who are predicting $50, now…

• What Would Falling Oil Prices do to Russia's Geopolitical Ambitions?

  The US shale boom has already hit Russia's Gazprom hard. Now, the rising boom in US oil production, along with other sources of new global crude production, are casting a shadow across Russia's grand plans for the future. The Russian government requires an oil price of above $125 in order to achieve fiscal breakeven. That means that the Russian government is being forced to either postpone spending, or dip into cash reserves, as long as oil prices stay well below that level.But now there is a very real risk that oil prices will dip from around $110 a barrel to…