Well, I certainly agree when you refer to the oil coming from Saudi Arabia as "cheap oil". The Kingdom has been able to increase its oil production by 700,000 bpd since February (from 9.7 mbpd to 10.4 mbpd, now its production is holding steady). However I don't agree when you say that is nonsense to talk about needing 50-60 projects every year, especially when we consider the fact that world Oil production has been increased only because of the US shale "revolution". Who is going to replace the oil production drop coming from Mexico? And the production drop coming from the North Sea
http://www.telegraph.co.uk/finance/...investment-collapse-from-oil-price-slump.html ? Are you implying that only and solely the Middle East will be able to power the world, when it only makes the 33% of the global oil supply -
http://ncusar.org/blog/2013/03/basic-facts-about-oil-and-gas-in-the-arab-world/ ? We were supposed to use a lot of unconventional oil resources to power our next cycle of economic growth. The soaring demand from China+India+emerging economies plus a strong Europe/U.S. will make the world to require 125 mbd per day in 2025
http://www.mnforsustain.org/oil_peaking_of_world_oil_production_appendix.htm, where do you plan to get this oil when arab countries produce only 30 mbd right now?- Why if not the Big Oil Companies were planning to drill in the Artic or start expanding deep-water oil projects?
Let's imagine that I'm wrong and you're right - In that case, the world is in for a massive oil price spike in the next 2-3 years - because demand will have grown stimulated by low oil prices (
according to the conventional thinking) but oil projects will not have come online - and it would be required at least some months/1-2 years to start them.
Agreed.
Well, it's certainly not my concept. It's Steve Ludlum's concept. He says that the QEs- "oil boosting effects" are gone, and what is worse, US consumers are tapped out as Saudi Arabia cannot buy US treasuries any longer- Because of the same drop in oil prices. In my opinion, he tries to explain the economic effects of a physical reality (There is more POOR quality oil, which requires more energy, capital, labor, and other inputs to be developed and extracted ; and there is less HIGH quality oil, which requires less energy, capital, etc), and how its effects reverberate through the economy. I guess he has done an excellent job, since he was able to forecast the oil price plunge (and the exact timing of it) more than 2 years before it actually happened.
Well, I chose the Eurozone example because it serves a lot when you have to counter-act the argument that less demand for Oil consumption means that the world is becoming more efficient. In that case, it signals that oil demand is lower because customers are going broke and misery is spreading. My point is that this is starting to happening in a global scale since some time ago. This is a good example of what I am saying:
http://www.telegraph.co.uk/finance/...oms-as-world-sinks-beneath-a-sea-of-debt.html . Customers are insolvent since they cannot longer service their debt. Only low interest rates across the globe and massive money-printing (Central Banks are basically giving us "more time" in order to return to a sustainable growth - a growth where our debts are repaid - , but I don't see it happening) have been able to postpone the outcome. However, the debt-system is entering in a contradiction phase: "damned if you do, damned if you don't", as more loans to the drillers will cause now more customers to go bankrupt (thus prices will plunge again)...
Best Regards,