Monday, June 23, 2008
Oil prices, how high will they go?
From May, 2007 to May, 2008, oil prices increased at about 6% per month. In June, we are on track for another 6% range increase:
$125.50 + 6% = $133
For the time being at least, a price increase of 6% per month appears necessary to balance demand against declining net oil exports. What is happening now is a continuation of what started in 2005 in poorer countries: a smaller number of consumers paying a higher unit price for a smaller volume. It's just that forced energy conservation has moved up the food chain, and it is now having widespread effects in wealthier countries(goodbye suburbs).
The big story this year (which with some important exceptions, is being still largely ignored in the Media) is the ongoing export decline from Russia, Norway, Mexico and Venezuela--key nearby sources of imported oil for Europe and the US respectively.
Current estimates show that Mexico's net oil exports fell from about 1.4 mbpd in 9/07 to about 1.1 mbpd in 5/08. At this rate, they would be exporting zero oil in about three years (from 9/07), roughly the Fall of 2010. If they manage to slow their decline rate by half, they might make it to the Fall of 2013. Either way the third largest source of imported oil for the US is only a very short time away from being able to provide no oil at all to the world market.
In this enviroment of falling exports and declining production it is no stretch to think that oil prices will continue there rapid rise. If they continue the 6% monthly increase of the past year, these are the barrel prices we'll be looking at:
Jul 08= $141.00
Aug 08= $149.46
Sep 08= $158.42
Oct 08= $167.93
Nov 08= $178.00
Dec 08= $188.68
Jan 09= $200.00
Feb 09= $212.01
Mar 09= $224.73
Apr 09= $238.21
May 09= $252.50
Jun 09= $267.66
Jul 09= $283.71
By next fall at these prices, the modern market economy could be in complete ashes. I sincerely doubt that Western lifestyles will exist as we know them now, with energy costs at that level. It appears that only massive painful demand destruction will have any real impact on oil prices.
$125.50 + 6% = $133
For the time being at least, a price increase of 6% per month appears necessary to balance demand against declining net oil exports. What is happening now is a continuation of what started in 2005 in poorer countries: a smaller number of consumers paying a higher unit price for a smaller volume. It's just that forced energy conservation has moved up the food chain, and it is now having widespread effects in wealthier countries(goodbye suburbs).
The big story this year (which with some important exceptions, is being still largely ignored in the Media) is the ongoing export decline from Russia, Norway, Mexico and Venezuela--key nearby sources of imported oil for Europe and the US respectively.
Current estimates show that Mexico's net oil exports fell from about 1.4 mbpd in 9/07 to about 1.1 mbpd in 5/08. At this rate, they would be exporting zero oil in about three years (from 9/07), roughly the Fall of 2010. If they manage to slow their decline rate by half, they might make it to the Fall of 2013. Either way the third largest source of imported oil for the US is only a very short time away from being able to provide no oil at all to the world market.
In this enviroment of falling exports and declining production it is no stretch to think that oil prices will continue there rapid rise. If they continue the 6% monthly increase of the past year, these are the barrel prices we'll be looking at:
Jul 08= $141.00
Aug 08= $149.46
Sep 08= $158.42
Oct 08= $167.93
Nov 08= $178.00
Dec 08= $188.68
Jan 09= $200.00
Feb 09= $212.01
Mar 09= $224.73
Apr 09= $238.21
May 09= $252.50
Jun 09= $267.66
Jul 09= $283.71
By next fall at these prices, the modern market economy could be in complete ashes. I sincerely doubt that Western lifestyles will exist as we know them now, with energy costs at that level. It appears that only massive painful demand destruction will have any real impact on oil prices.
