MattB

How Low Can Crude Oil and Gas Go?

Oil prices below $50-60 spell disaster for many of the primary producing countries' economies - notably Middle East, Russia and Venezuela. Geopolitics says the price cannot stay below that level for long without increasingly desperate measures to underpin the price. I agree that the spot price is driven more by perceptions and speculation than fundamentals - $30 makes no more sense than $150 did (although I think the latter is a truer reflection of the supply/demand balance once the global economic correction settles down). Looking beyond the violently swinging price pendulum, I think a realistic price target for 2009 - assuming there are no more major nasty suprises in the economic closet - is in the $65-80 range.

Oil: Does Supply and Demand Still Apply?

I agree with most of the earlier comments ... misses the point.
First, a large fraction (if not majority) the exploration wells are targeting natural gas, not oil. Liquids production may certainly have peaked (not going to argue about when) but the global energy mix features a lot more nat gas usage today (e.g. via LNG production and transport creating an arb market) and it will continue to grow in importance.
Second, the size of new discoveries follows an approx log-normal distribution, with only rare exceptions (e.g. Brazil). You need an exponential increase in exploration success to maintain a constant reserves replacement, and global offtake is increasing, not flat.
Third, enhanced oil recovery is allowing operators to get substantially more oil from existing discoveries than was possible in the past , and technology is also allowing recovery from intervals previously considered unproducable (e.g. shale gas, dominating US growth in nat gas development) These have a not insignificant effect on the supply side as "conventional" plays are replaced by "unconventional".
Conclusion: the supply side is way too complex to simply talk about drilling success rates and some mythical peak from whence liquid hydrocarbon production will be in terminal decline...