Monday, November 14, 2011

Crude Reality...

Even before the shadow of an Israeli precision strike on Iranian nuclear facilities becomes a reality and threaten to drag the entire mideast into a war that no one can win,I have been bullish on crude.My reasons are as mentioned below:-

1.Biofuels and other green fuels are still half a decade from fruition and being able to replace the current
2.The last great year for "big"discoveries was 2009 when BP found a giant deep water well in the Gulf of
   Mexico and Anadarko made a discovery in Sierra Leone.The wells in the middle east are going dry
   i.e.Dubai,Abu Dhabi,Sharjah are trying to turn into financial centres and only Kuwait has some supplies
   but historically since 1980s the discoveries have not kept pace with demand
3.Exploration remains a risky, and costly, business, where some deepwater wells can cost up to $100
   million. From 30 to 50 percent of exploration wells find oil.  
4.The greed of OPEC
wpe5.jpg (20529 bytes)

SUSPICIOUS JUMP in reserves reported by six OPEC members added 300 billion barrels of oil to official reserve tallies yet followed no major discovery of new fields.

5.The technolgy for drilling oil wells in the deep sea are still extremely expensive and unreliable which adds
   to the cost of production
wpe3.jpg (53494 bytes)
GLOBAL PRODUCTION OF OIL both conventional and unconventional (red), recovered after falling in 1973 and 11979. But a more permanent decline is less than 10 years away, according to the authors’ model, based in part on multiple Hubbert curves (lighter lines). U.S. and Canadian oil (brown) topped out in 1972; production in the former Soviet Union (yellow) has fallen 45 percent since 1987. A crest in the oil produced outside the Persian Gulf region (purple) now appears imminent

Into this if the Israelis decide to take out Iranian nuclear facilities located as per the map...
then a war involving Palestine-Syria-Iran on one side and the US-Iran-NATO powers on the other hand looks inevitable.
Iran Nuclear Program MapSuicide bombers,terrorist attacks would be the first line of attacking the US and the situation is scary.

For India oil at $100 might not lead to recession straightaway but the economic impact will be hard.

Politics,Business and Oil will set the tone for the decade to be...

1 comment:

  1. I think you are very right Vishal. Almost every goods or service produced has an Oil component, it is essential as energy but also as a chemical components from plastics to fertilizers. Reserves have been overstated in most the Middle East as to reassure the citizens of these nations and minimize political instability. There are two types of equilibrium, one stable ( i.e. a motionless ball at the bottom of a jar for instance ) and unstable, Oil belongs certainly to the latter and with the need of the BRICS to adopt Western living standards demand for it is far from slowing down.