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Oil Executives Planning on $250 Barrel Oil

Today, during the discussions of industry leaders in Davos,  Shell CEO Peter Voser stated the oil industry would have to find up to $27 trillion of investment over the next 20 years to meet demand.  World oil production peaked in 2008 reaching 85 million barrels per day, but has remained south of that number since.  However,  oil industry projections show demand increasing another 15 mb/day by the year 2030.
Some simple calculations will reveal 15 mb/day for 20 years at a price tag of $27T equals around $250 per barrel.  And figuring a present $3/gal gasoline in the USA at $80/barrel we can extrapolate $9 per gallon prices for this incremental 15 mb/day.

Is this finally the Peak Oil that everyone has been anticipating?  World demand at 100 million barrels per day and a cost of $13.8 trillion per year?  The Peak oil of 85 mb/day in 2008 cost the world approximately $4.2 trillion.  Are we really going to spend an additional $27 trillion for an 18% increase in oil? If this isn’t the law of diminishing returns in action, our eyes are too black with oil to see it.

Who will tell us when Peak Oil arrives?  The oil industry?  Our governments? Who will stand up and say OMG if we kept oil demand at 85 mb/day, we could invest $27 trillion in alternative energy systems. Oil companies are going to the capital markets to acquire these funds.  We could just as easily get the funds for wind farms or LNG filling stations, or bio-fuel production.  We only need to produce 15 mb/day.  I hear opportunity knocking – in the good old USA.  And guess what would happen if the world got ear to the rumor - USA to produce the equivalent of 15 mb/day of oil with new energy technologies.  Why world oil prices would... hit the floor.


Disclosure: no positions