Quote:
Originally Posted by redneck
We were told that the reason for high prices during the last decade was because we had reached "peak oil" and that all known oil reserves were in decline.
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Well, firstly, we had high prices not because of peak oil. We had high prices because of investor speculation, fueled by economic instability.
And secondly, all known oil reserves are in decline. US shale oil is a known reserve, has been for decades. The difference now is that Middle East oil is so expensive that it's viable. A few decades ago, you could only sell US Shale oil at a loss. Now, with more aggressive techniques like fracking, and with Brent oil consistently over the $80 a barrel mark (and flirting with $100 from time to time), setting up new wells in the US finally makes economic sense.
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Saudi Arabia is trying to squeeze WTI to gain more sales in America, given that sales are flat around the rest of the world...
It's a squeeze you can make if you still have the biggest proven reserves in the world. And it's a tactical squeeze:
Oil Slump Means Canceled Projects as Investment Declines - Bloomberg
Things look rosy because the price at the pumps is low. But the price at the pumps is low because demand still hasn't recovered. And if not enough people are willing to pay for $100 a barrel oil, then we won't have new wells. If we don't have new wells, then we'll have another boom and bust cycle as the old ones dry up, before the new ones come online.
We've not so much hit peak oil as hit peak demand... and economic contraction is hurting the oil industry. Unless the WTI goes back up to around $90, the current boom will peter out as the wells dry up. And shale wells dry up much faster than Arabian wells! This is the Saudi game. It hurts them to sell low, but not as much as it hurts the new guys. Still, you have some breathing room. It's when you go below $80 that things start getting dicey.
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Peak oil ain't simply us using up all the oil there is. That's impossible. We will simply edge closer and closer to peak oil before it becomes too expensive for anyone to want to dig up more of it.