If Oil Gets Much Harder To Find, How Can It Stay Below $100?

The consultants at Wood Mackenzie say that finding new supplies of oil fifteen years from now will be much more expensive and will also require means more likely to harm the environment.

According to the Financial Times, the crisis may be as near as 2020. It makes the point that “the challenge is huge, said Matthew Simmons, an industry banker who sent shock waves through the oil world when he questioned whether Saudi Arabia, the most important oil source, would be able to continue to expand production.”

With oil at $60 a barrel, it is fairly hard to believe that the issues of supply will not cause it to rise to a price above that and soon.

That is, of course, if the study is right.

In a recent interview with the National Geographic, Leonardo Maugeri, author of ‘The Age of Oil: The Mythology, History, and Future of the World’s Most Controversial Resource”, makes the point that very little of the world’s oil reserves have be exploited. He uses a number of illustrations, including the following: “ Many countries, Saudi Arabia in particular, have discovered oil fields in the past but have never developed them because of their fear of creating excess capacity” .

The trouble with forecasting oil supply or price is that a nose count of experts might find them equally divided on whether supply is a problem or not. Another count may find a similar division on issues of demand.

Helpful all the way around.

Douglas A. McIntyre can be reached at [email protected] . He does not own securities in companies that he writes about.