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VK2AAB > FUEL 27.10.09 16:07l 58 Lines 2847 Bytes #999 (0) @ WW
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Subj: Oil Price GDP & Recession
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To : FUEL@WW
OIL PRICES SUPPLY & GDP
At the recent International ASPO conference in Denver USA, a number of
presentations discussed the relationship between oil prices, supply, demand
and GDP.
Looking back at 2007 and 2008 it has been fairly obvious that the July 2008
peak of US$147 a barrel was too high as it immediately put the economy into
recession and the resulting collapse of demand put the oil price into a dive
to US$33 a barrel.
This swing established a bottom and top limit for oil pricing. However
at prices in the thirties oil search and field development stopped. OPEC
declared it needs about US$70 to US$75 a barrel. Developers of the Canadian
oilsands are suggesting around US$80. Deep sea developers such as those off
the coast of Brazil and the Gulf of Mexico are looking at figures over US$100
a barrel. These new offshore very deep wells are going down to distances of
35,000 feet, and are costing around $1 million a day to drill. Billions are
being spent to establish each well in a field. These wells will not be
producing for about 8 to 10 years.
It is obvious that cheap fuel is now a thing of the past and any price
you are now paying will be significantly higher in the future. However it has
been suggested that any price over US$75 a barrel will have a dampening effect
on the economy and any price under US$65 a barrel will cause the shutdown of a
significant number of fields.
The magic figure seems to be that when the price reaches 4% of GDP a recession
is likely. Some have suggested that this figure is a little higher, but it is
early days and no one is really sure. The only certainty is that demand may
have peaked in that our economies cannot afford higher prices and that we are
limiting our oil usage.
There is someone in the woodpile and that is China and to a lesser
extent, India..
China has, over the last few years been scouring the world making long term
buying contracts, including Australia, in oil and natural gas. In a time of
tight supply China will have cornered the market. Note that in the July period
China?s oil imports increased by one million barrels a day. At this rate, the
present buffer of around five million barrels a day could rapidly disappear.
Countries like Australia that import around 50% of their usage are very likely
to experience supply difficulties.
This url includes a graph which shows the relationship between oil price peaks
and recessions. It also discusses GDP effects.
http://www.energybulletin.net/node/37822
This one comments on papers at the conference.
http://www.peakoil.com/modules.php?name=News&file=article&sid=52213
This is the list of speakers at the conference. Their papers are not yet up on
the website.
http://www.aspo-usa.org/2009denver/ConfirmedSpeakers.cfm
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