Wednesday, May 07, 2008

Latest oil price projections...

...from industry analysts who aren't owned by big oil companies.

$100 a barrel: Going, Going....
Posted by aeldric on May 6, 2008 - 7:00pm in TOD: Australia/New Zealand
Topic: Demand/Consumption

Having run the model for the last two years I have noted the following:

- The results while fairly accurate in emulating the observed market price for oil, do not take into account a number of distorting factors affecting the market. These factors include, supply disruptions and the human factors (greed and panic) that affect any market.

- The prices are on a 2006 USD basis. I subsequently added an allowance for inflation into the analysis. Anyone want to take a guess at what inflation will be in 30 years time? I have used a consumption- weighted figure between OECD and non-OECD current inflation rates and applied it to all future years.

- There will be an increasing trend for governments to hoard and lock up future supply. I have made a very rough attempt to * forecast the volume and timing of this factor in the spreadsheet. My view is that by 2030, all traditional oil sources will be subject to this government interference. Hence the above curve only represents the market price up till that time.

...In order to improve the accuracy of the model I intend to undertake the following revisions :

- Further division of the demand sectors with a separation of China/India from the non OECD group.

- Generation of separate sectors for essential services and perhaps agriculture in order to get a clearer idea of the likely effects government intervention may have on the demand.

- Incorporation of feedback on secondary demand destruction resulting from economic slowdown.

I hope the above curves form a useful discussion point for TOD members.

I'm doubting the revised data will show much of an improved projection. And I think government will start "interfering" - that is, hoarding, rationing, and then making personal automobiles practically illegal long before 2030. We'll be lucky to make it another 4 or 5 years without that happening - at best! If you recall, Matt Simmons (CFR), energy analyst and investment banker, predicted about 7 years before total meltdown last year - one down, six to go - before the serious supply collapse sets in, and government will have to act before that happens to secure their own supply.

Anyway, if oil gets as expensive as this chart is showing, they won't actually have to outlaw automobiles because no one will be able to afford to drive anyway. I can't image how anyone can pay for gas to double again in price in the next couple of years. I know my budget can't take that. Can yours? I didn't think so.

No comments: