Views & Insights

Why we're not so sure of a forever climbing oil price

For many years, analysts have been predicting a dramatic rise in oil prices dictated by a combination of rise in demand, driven partly by the Chinese and Indian burgeoning middle classes, and limits to production. But price is all but clearly defined by supply and demand. The speculation on the price of oil is very strong. As with most traded commodities, but more so, the current price of oil incorporates curbs in production by most global players. With Middle Eastern nations going through the first political transformation in centuries without significant external influence, the future of oil production in the region in very uncertain. Which means most trend predictions are pointing at pessimist scenarios.
However, the current high price of oil is leading to significant geostrategic changes in countries around the world. The use of hydraulic fracturing, or “fracking”, is changing the face of the global energy landscape. Some analysts believe the US will become a net exporter within the decade.
And there are signs that Greenland is now within reach for surveying. The UK has also accepted fracking for further extraction with analysts accepting that it is still early for wild optimisms.
These signs, together with the hesitant growth of emerging economies, put additional uncertainty on upward trend predictions.

Middle Eastern countries will take a while to reposition themselves within oil producing nations. Within these countries, it is increasingly unlikely that price or production coordination is achieved. Most countries are now producing what they can, not what they want.  If political alignment is ever recovere
d in the future, the global context will be unrecognisable. There will be a lot more hybrid cars, a lot more renewable and nuclear capacity, and oil will be priced to compete. Times are changing, and although commodity investors will still try to track oil prices and make a return, it is far more likely that significant returns will come out of disruption. We will follow the impact of fracking with some interest. However, we will follow electric vehicles, renewables and nuclear with a lot more.
http://www.icenews.is/2012/12/13/controversial-greenland-mining-labour-bill-approved/
http://ourfiniteworld.com/2012/04/16/the-myth-that-the-us-will-soon-become-an-oil-exporter/
http://www.indexmundi.com/energy.aspx?product=oil&graph=production