Wednesday, October 31, 2007

Why Oil May Not Stop at $100

Neil King, Jr. who wrote an WSJ article stating that after an energy conference , several leading oil experts claiming that oil may go past the $100 mark per barrel due to shrinking supply and higher global demand. These oil experts state that new pockets of oil are harder to reach and more expensive to tap. Yet, two members of OPEC tend to disagree. They assert that the falling dollar is contributing factor in rising oil prices while many of the theories presented at the this year's Oil & Money conference stated that there could be many reasons as to why oil prices are so high. It's hard to pinpoint a single cause.

One concern and possible theory that oil prices are so high is that fact that a lot of production in the Middle East is done fron mature oil reserves. These oil reserves are about 41% depleted and may cause a 15 year production plateau. There are more reserves in the wait but to get to them in time would be very costly and may not be possible due to technology and lack of funding.

OPEC officials have aggressively struck down the notion that they are to blame for the high prices by insisting that the market has more control over oil than OPEC.

With 2/3 of the world's oil coming from OPEC, consumers can hardly discern whether oil prices are set by OPEC or by other factors, such as geopolitics, currencies and/or financial investments within the industry. With the Gulf of Mexico and the North Sea reserves helping to ease the control that OPEC may have thought they exuded over oil prices, these prices, like everything else, have more than just one factor to determine how the price is set. With the dollar falling, that may be a bigger factor to oil prices than OPEC.

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