Why is Black Oil headed for $200/b?

[TOM4CWB]

C.P. et el:

Most folks think #120/b is absurd... but what about $180 or $200/B... in the next 2 years?

The Saudis just announced such a possibility... as did this article about why many producing countries are going to produce- LESS BLACK OIL... NOT MORE!!!:

"It's never easy to find $1 trillion in investment capital, but the Russian government has made it hard for its oil industry to attract even a small part of that capital. The Kremlin has structured taxes so that most of the extraordinary rise in oil prices flows into government coffers, not oil-company profits.

When oil rises above $27 a barrel, the Russian government takes 80% of any additional revenue in taxes. That means at $67 a barrel, an oil company gets just $8 more a barrel in revenue than at $27. If the price climbs to $107 a barrel, the oil company's revenue increases by just $16 a barrel from what it was at $27 a barrel.

That may delight U.S. consumers who believe oil companies are making obscene windfall profits from soaring oil prices, but it hasn't made companies eager to sink their money into developing new oil in Russia.

The production decline in Russia would be serious enough if it were an isolated problem. But it's not. The same conjunction of geology and geopolitics is crimping production in Nigeria and Mexico, for example.

It's never easy to find $1 trillion in investment capital, but the Russian government has made it hard for its oil industry to attract even a small part of that capital. The Kremlin has structured taxes so that most of the extraordinary rise in oil prices flows into government coffers, not oil-company profits.

When oil rises above $27 a barrel, the Russian government takes 80% of any additional revenue in taxes. That means at $67 a barrel, an oil company gets just $8 more a barrel in revenue than at $27. If the price climbs to $107 a barrel, the oil company's revenue increases by just $16 a barrel from what it was at $27 a barrel.

That may delight U.S. consumers who believe oil companies are making obscene windfall profits from soaring oil prices, but it hasn't made companies eager to sink their money into developing new oil in Russia.

The production decline in Russia would be serious enough if it were an isolated problem. But it's not. The same conjunction of geology and geopolitics is crimping production in Nigeria and Mexico, for example.

Paying less than what's fair
In Nigeria, a third of the country's oil output by 2015 is at risk, energy advisers to Nigerian President Umaru Yar'Adua have warned, because the government hasn't been paying its share of the costs of joint ventures -- about $3 billion to date -- with Royal Dutch Shell (RDS.A, news, msgs), ExxonMobil (XOM, news, msgs), and Chevron (CVX, news, msgs). If the government's failure to pay jeopardizes the joint ventures, Nigeria can kiss plans to double its production goodbye. Instead, total oil and gas production will fall 30% by 2015."http://articles.moneycentral.msn.com/Investing/JubaksJournal/WhyOilCouldHit180DollarsABarrel.aspx?GT1=33009

"In the short term, the oil market is right not to underestimate the ability of the governments of national oil producers to shoot themselves in the foot by starving their national industries of capital. We're likely to see a continuation of these self-defeating strategies among enough big oil-producing countries to keep oil prices climbing until global consumers finally say, "We can't take higher prices anymore." In that crisis, falling demand will break the upward trend in oil prices."

At $120/B... we are obviously not there!

So... if Oil is going to $200/B...

What does this mean for grain growers?

What does it do to fertiliser prices... etc.?

Everyone is after Premier Ed... because he is the oil companies best friend... according to Green Peace!

What do you think... are we just at the beginning of higher oil prices?

[agstar77]

The next shoe to drop will be shortage of cash for inputs. Interest rates will be forced up due to high inflation. Be prepared for it. Don't take on any more debt than you believe you can handle at triple todays interest rates.

[agstar77]

On the bright side do a Google search on Mini Nuclear reactor. This might put a dampener on oil prices. Can you say Nuclear powered remote controlled tractors?

[jensend]

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article3837029.ece

i got flamed on this board a few months ago for saying i thought there were more implications to high grain prices than just increased revenues to grainfarmers. what tom is talking about in the threads he's started this morning are probably just the tip of the iceberg. i think if this shortage gets serious enough and the multinationals try to take too much advantage of it you'll see the whole system tip over and reality will come a lot closer to n. america.

[melvill]

Generally we see that as prices for many consumables, including some foods, increase, people will purchase smaller quantities.

The scarey thing is that I don't see nearly the same consumer response to increasing fuel prices. One would expect that with increasing fuel prices consumers would, in the short run, drive less or, in the medium or longer run, drive smaller, more fuel efficient vehicles. I can't monitor individual's travel distances but I certainly don't see much in the way of new smaller vehicles been bought here in Brooks.

My theory is that we've had such cheap energy - fuel - prices for so long that N. American consumers look at unlimited travel as a right not a privilege. Yes, they complain about the cost of a fill-up but so many don't seem to do anything about their consumption levels. I note the two RV dealers here in town are selling quite a few big fifth-wheels or hitch trailers this spring. There are few or no ittle RVs sitting on the lots here or new ones sitting on driveways.

So, in our culture, is travel a right or a privilege? What are your thoughts?

[cottonpicken]

C.p?

Charlie or cottonpicken?