worthy

A Supply Side Problem: Oil's High Price is Here to Stay

To Brian Pursley,

Yes, and who knows, perhaps baked beans and kraut will power the proverbial Dutch windmills.

A Supply Side Problem: Oil's High Price is Here to Stay

The two comments thus far are overly simplistic. The original article also has a flaw. The notion that a supply level of "x" will lead to inelastic pricing is valid. The problem is that we do not know at what supply level. We do not know the degree of demand destruction owing to the "flipside" of inelasticity, i.e. higher prices can reach levels that destroy demand to the degree that is presently immeasurable, because we have never been in a worldwide economic circumstance like we are now. Further, complementary fuels such as natural gas, coal, et al can "steal" some of that demand permanently. Add in solar, and wind generated electricity, and one is hard pressed to know what oil demand is going to look like over the next decade or two.
It is probably a safe bet that we won't see $50 per barrel anytime soon, but???, who thought the Nasdaq could fall 80% as it did from the years 2000-2002? As the old saw goes, "never say never"...

Pay Attention to Oil Decline Rates

Great article, Jim. I agree with you that getting accurate information as to actual rates of decline is somewhat difficult, but the main point that I think many people know, but ignore, is that all fields decline. Duh! Right? What is so problematic is not just replacing that production lost to decline, but adding enough more production to accomodate additional demand. 87mm bbls a day say losing 5% is 4.35 mm bbls lost each year. If we need an additional 1.5 mm bbls for increased demand, we need to find just short of 6 mm bbls per year. Very simple math. Regrettably, those who would deny drilling rights for the OCS, ANWAR, and other areas, just plain do not "get it". Actually, they probably do "get it", but need to get re-elected this fall...