Posted by LAA on November 04, 2012 at 09:32:04 from (86.51.147.113):
In Reply to: Re: green cars posted by MarkB_MI on November 04, 2012 at 08:48:16:
I thought you may have meant the mid 2000's but that little oil drilling boom and subsequent rise in price was precipitated by an unprecedented increase in world wide demand coupled with the previous 15 years of relatively light exploration activity in all but a few areas, the absolute proof that the high prices were demand driven is the absolute collaspse of oil prices in the first quarter of 2009 when the world wide economy was in deep trouble and demand in Asia fell by 70%. For most countries in the middle east, which are all low consumption nations, the strategy is to maintain production at a given levels and have a somewhat certain revenue stream, this strategy works well most of the time and especially so when high consumption countries have to try and make up the difference of increased demand in order to keep their economies on track. There is very little oil sold world wide below production cost, there are certain fields with high start up and infrastrucure costs but these properties are not developed unless the operators are sure of the economics, it is very easy to shut a well in and wait for market conditions to improve, just as a farmer stores grain if his cash flow situation allows. As technologies such as fracking develop and are used the techniques always improve and efficiency increases, extraction becomes cheaper and production goes up, it has already happened with shale gas, the cost of producing shale gas in the majority of US fields is 1/2 to 1/3 of what it was a few short years ago and it will get cheaper yet, the same thing will happen with shale oil.
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