Is there a risk of falling oil industry investment?

Vortex · Post by **Vortex** » 28 Apr 2007, 20:46

I have read that as oil becomes scarcer the oil producing countries will get greedier.

The oil producers need foreign skills to find & produce oil.

However if the oil exploration companies don't get a fair return for their work then they simply won't look for oil.

This could lead to supplies falling quicker than anticipated, which would lead to even higher prices.

This nasty feedback loop may in fact happen - or the oil producing countries will need to ensure that the oil exploration companies are paid well in order to find the stuff.

Perhaps it's time to invest in the exploration companies - they would seem to be in a position of power in the oil location / production equation.

Alternatively, perhaps Saudi Arabia etc should put a bit of their CURRENT wealth into setting up a 100% native and effective oil exploration company?

http://timjoh.com/price-elasticity-of-d ... y-for-oil/
http://www.businessday.co.za/articles/w ... BD4A312789

MacG · Post by **MacG** » 28 Apr 2007, 22:16

This is a bitch, and I think that the complexities make predictions very difficult. One creeping suspicion keep haunting me though: The possibility of a tidal shift in market psychology as soon as we get firmly beyond peak.

Consider this:

Either:

You are heading an oil extracting country in a world where there is plenty of oil and sell for $13 per barrel. If you reduce your output, someone else will take your place and your income will simply be reduced in proportion to the reduced extraction.

Or:

You are heading an oil extracting country in a world where oil is limited and sell for $70 per barrel. If you reduce your output nobody can fill the gap and the price rise further, keeping your income constant, or maybe even increasing it.

When considering that the entire world seem to be engaged in short term profits and there seem to be a really strong NMP-field around the long term issues, well, why pump more? If you can get the same or more money by pumping less? Industrial consequences? Not My Problem!

snow hope · Post by **snow hope** » 29 Apr 2007, 01:15

It surprises me that some countries haven't already decided that they will stop exporting, as they want to use their limited oil to keep their own country going BAU for the next 30-50 years even if other parts of the world start to crumble....... when you think about this, why hasn't it happened??

Post by **kenneal - lagger** » 29 Apr 2007, 02:22

snow hope wrote:It surprises me that some countries haven't already decided that they will stop exporting, as they want to use their limited oil to keep their own country going BAU for the next 30-50 years even if other parts of the world start to crumble....... when you think about this, why hasn't it happened??

It's happening already. Russia is gradually chucking out foreign oil companies and nationalising its oil production and marketing. Venezuela is doing the same.

writerguy · Post by **writerguy** » 29 Apr 2007, 04:33

kenneal wrote:
snow hope wrote:It surprises me that some countries haven't already decided that they will stop exporting, as they want to use their limited oil to keep their own country going BAU for the next 30-50 years even if other parts of the world start to crumble....... when you think about this, why hasn't it happened??
It's happening already. Russia is gradually chucking out foreign oil companies and nationalising its oil production and marketing. Venezuela is doing the same.

Yes. Venezuela's big nationalization happens on May 1, the day after April 30th...

The reason that countries don't stop exporting, IMO: they're addicted to the income. And they have the infrastructure in place. But according to this logic, there's negative incentive for them to actually find and pump new oil right now, as I see it. Why do it now, when it will be worth more in the future, and may also be less expensive to extract?