170
PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
in the price ranging from 10% to 31%. So, the latest retreat of 22%
should not be so unexpected.
Notwithstanding, many saw this 2008 price retreat as a continuing stable trend to much lower levels and rejoiced over the permanent relief that much cheaper oil would bring. However, it is
felt that as oil stocks are depleted further and peak oil becomes
a reality, liquid fuel prices and price volatility will increase dramatically. With price volatility, there will be a dramatic shift
between high prices and low prices and that even if the low prices
are significantly lower than the high prices, this should not be
used as a reason to withdraw from the investigation of alternate
sources of liquid fuels. As with any commodity, crude oil prices
have retreated and advanced with overall effect (in recent years)
to move to new record prices. Thus, the likely overall trend for the
price of crude oil will be aggressive price rises from a variety of
underlying causes, which are not reflective of the price variations
of many other commodities. Indeed, world political and geopolitical events, and economic growth and decline, have all influenced
the price of oil over the decades.
Prior to 1973, the oil-producing countries had initiated two previous embargoes — one in 1956 and another in 1967. But, because
the United States was an oil exporter, these embargoes had no
affect on the United States. After 1970, the United States was an
overall oil importer and it is not surprising that the oil-producers
embargo of 1973 had a much greater effect on the United States. At
the time, Saudi Arabia was assuming the role of price-controller
through control of the production of oil. In the 1980s, as the North
Sea and North Slope oil came on line, there was some effect on
Saudi Arabia's control, but the favorable economics of producing
oil from these two fields was not to last. The cost of oil production
from the Saudi fields dropped below the cost of producing North
Sea oil and price was again set by Saudi oil production. This was
reinforced during the First Gulf War when Saudi Arabia more than
made up for the lost of Kuwaiti and Iraqi oil production. However,
since 2000, Saud Arabia no longer has the excess oil production
capability to drive down the price of oil. Neither does any other
producer, although Venezuela would like to move into the position of swing producer but, other than heavy oil resources, does not
have the resources of conventional oil to do this.
Thus, the world, particularly the United States, is in a period
where no one country has control over production and thus no one
country has control over price.
PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
in the price ranging from 10% to 31%. So, the latest retreat of 22%
should not be so unexpected.
Notwithstanding, many saw this 2008 price retreat as a continuing stable trend to much lower levels and rejoiced over the permanent relief that much cheaper oil would bring. However, it is
felt that as oil stocks are depleted further and peak oil becomes
a reality, liquid fuel prices and price volatility will increase dramatically. With price volatility, there will be a dramatic shift
between high prices and low prices and that even if the low prices
are significantly lower than the high prices, this should not be
used as a reason to withdraw from the investigation of alternate
sources of liquid fuels. As with any commodity, crude oil prices
have retreated and advanced with overall effect (in recent years)
to move to new record prices. Thus, the likely overall trend for the
price of crude oil will be aggressive price rises from a variety of
underlying causes, which are not reflective of the price variations
of many other commodities. Indeed, world political and geopolitical events, and economic growth and decline, have all influenced
the price of oil over the decades.
Prior to 1973, the oil-producing countries had initiated two previous embargoes — one in 1956 and another in 1967. But, because
the United States was an oil exporter, these embargoes had no
affect on the United States. After 1970, the United States was an
overall oil importer and it is not surprising that the oil-producers
embargo of 1973 had a much greater effect on the United States. At
the time, Saudi Arabia was assuming the role of price-controller
through control of the production of oil. In the 1980s, as the North
Sea and North Slope oil came on line, there was some effect on
Saudi Arabia's control, but the favorable economics of producing
oil from these two fields was not to last. The cost of oil production
from the Saudi fields dropped below the cost of producing North
Sea oil and price was again set by Saudi oil production. This was
reinforced during the First Gulf War when Saudi Arabia more than
made up for the lost of Kuwaiti and Iraqi oil production. However,
since 2000, Saud Arabia no longer has the excess oil production
capability to drive down the price of oil. Neither does any other
producer, although Venezuela would like to move into the position of swing producer but, other than heavy oil resources, does not
have the resources of conventional oil to do this.
Thus, the world, particularly the United States, is in a period
where no one country has control over production and thus no one
country has control over price.