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The Self-Defeating Oil Surge

Folks said the same thing in 2005, when Goldman said WTI would reach 100$.

The Self-Defeating Oil Surge

Here's what's going on:

1. Emerging markets have huge economic growth. Right or wrong?
Right.

2. Anyone think, that growth of that magnitude can be achieved without
substantial growth in demand for oil and other commodities?
Not really.

3. Is it true, that when there is one pie, and suddenly twice as many
people want a piece of that pie, that the price for a piece is going to
double? Yes!

4. Is it true, that every 'super giant field' (which made cheap oil possible)
on the planet is in decline?
Yes.

5. Do oil companies around the world scramble to bring new production
online? Yes, otherwise oil service companies wouldn't make as much
money as the do.

6. Is it true, that this new production is mostly absorbed by the decline
of existing production? Yes, obviously.

7. Now the important question: Is new production coming online ONLY
because of the seemingly high price of oil? Yes, definitely!

8. Is any oil company going to develop projects with per barrel costs
north of 65$, when the price of oil is 65$ or less? Hardly.

To sum up:

NEW OIL FIELDS ARE BEING DEVELOPED, BECAUSE OIL IS UP,
OIL IS NOT UP IN SPITE OF NEW PRODUCTION!