Oil pricing and you....
We in Midland had the rare opportunity to hear one of the world's premier oil analysts live and in person last night. As some of us in the crowd joked, one explosive device would have wiped out the Permian Basin oil business, such were the numbers of people in attendance.
Matt Simmons has been an energy investment banker since 1973 and over time has gained great stature as one of the leading thinkers on the subject of oil, gas and energy in general. He has recently written a book entitled, "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy." His research, started many years ago before the present price crunch, led him to believe that the capacity and life of the Saudi oil fields was being vastly overstated and overrated. These fields, he believes, are in a state of decline and in fact no new large fields have been found in Saudi Arabia since the 1970's.
This is crucial because for decades economists and analysts have thought of Saudi oil like a central bank, stepping in to shore up supply shortages and keeping the price of oil fairly moderate. A decline in production means that in reality this is not possible for the Saudi's anymore.
While not predicting future price scenario's Mr. Simmons believes oil is still very cheap at $70/bbl. This bears some truth to me if one compares oil, our lifeblood, to other common products. With oil at $70/bbl. the price of a gallon of it is 60 cents, translating into, roughly, $3 a gallon gasoline. At this price consumers are outraged, towns boycott Exxon and the senate passes an anti-gouging bill aimed at Big Oil. Yet the outraged consumers don't seem to be sellng their SUV's nor driving less nor to be so strapped that they have to stop buying their bottled Dasani Lemon Water for $1 a pint.....which is $4 a gallon. Hmmm? Water costing six times what a gallon of oil costs. It would seem that oil has a long way to go on the upside to achieve full value.
In a nutshell, this was Mr. Simmons concluding point. Ever since modern man has used fossil fuels to power his world, he has been used to cheap, much too cheap, fuel. Simmons is quick to point out that we are not running out of oil, but we are running out of easy to find, high grade....and cheap oil, so the recent high prices are probably not an abberation, but a harbinger of things to come.
My synopsis is thus: big changes are in the wind in the world of energy and since energy powers our economy and lifestyle, big changes are in store for Americans. Mr. Simmons thinks sooner rather than later.
Read more here on Mr. Simmons thesis
We in Midland had the rare opportunity to hear one of the world's premier oil analysts live and in person last night. As some of us in the crowd joked, one explosive device would have wiped out the Permian Basin oil business, such were the numbers of people in attendance.
Matt Simmons has been an energy investment banker since 1973 and over time has gained great stature as one of the leading thinkers on the subject of oil, gas and energy in general. He has recently written a book entitled, "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy." His research, started many years ago before the present price crunch, led him to believe that the capacity and life of the Saudi oil fields was being vastly overstated and overrated. These fields, he believes, are in a state of decline and in fact no new large fields have been found in Saudi Arabia since the 1970's.
This is crucial because for decades economists and analysts have thought of Saudi oil like a central bank, stepping in to shore up supply shortages and keeping the price of oil fairly moderate. A decline in production means that in reality this is not possible for the Saudi's anymore.
While not predicting future price scenario's Mr. Simmons believes oil is still very cheap at $70/bbl. This bears some truth to me if one compares oil, our lifeblood, to other common products. With oil at $70/bbl. the price of a gallon of it is 60 cents, translating into, roughly, $3 a gallon gasoline. At this price consumers are outraged, towns boycott Exxon and the senate passes an anti-gouging bill aimed at Big Oil. Yet the outraged consumers don't seem to be sellng their SUV's nor driving less nor to be so strapped that they have to stop buying their bottled Dasani Lemon Water for $1 a pint.....which is $4 a gallon. Hmmm? Water costing six times what a gallon of oil costs. It would seem that oil has a long way to go on the upside to achieve full value.
In a nutshell, this was Mr. Simmons concluding point. Ever since modern man has used fossil fuels to power his world, he has been used to cheap, much too cheap, fuel. Simmons is quick to point out that we are not running out of oil, but we are running out of easy to find, high grade....and cheap oil, so the recent high prices are probably not an abberation, but a harbinger of things to come.
My synopsis is thus: big changes are in the wind in the world of energy and since energy powers our economy and lifestyle, big changes are in store for Americans. Mr. Simmons thinks sooner rather than later.
Read more here on Mr. Simmons thesis
