"There's Oil in Them Thar Mountains"
Posted By Rob Millard - 1 Comments -
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Heres a factoid from the Oxford Analytica conference that caught me a little by surprise:
The USA is sitting on oil reserves more than 3 x the total of Saudi Arabia, in the form of oil shales in the Rockies. Much of these can be profitably exploited at $45 a barrel. Major reasons why they have not been more fully exploited in recent times included fear amongst oil companies that supply and demand could go weird again like it did in the 1980s and the oil price could plummet again; and also that importing from the Middle East was easier and cheaper. Until now. A recent USA Today article, Oil Shale Enthusiasm Resurfaces in the West gives a pretty good overview.
Oil back below $45 a barrel? Be careful how you bet on this, crazy though its sounds, especially given OPEC's decision yesterday to quit quotas. The short term impact is that Venezuela and Nigeria began immediately to cut oil production and Iran's representative to OPEC said Tehran would back any attempt by member countries to prevent further drops in the oil price.
OPEC in fact appears to have abandoned its quota system, leaving a vacuum as to how it intends to manage the market and communicate with its participants. The long term impact if this persists? Who knows...
On the topic of oil and for those into conspiracy theories, here's one that is actually plausible from James D. Hamilton, Professor of Economics at the University of California, San Diego. It's on his blog Econbrowser and is called The Great Gasoline Conspiracy.
Being able to play out "what-if" scenarios is an essential skill for any strategist. It is key to being able to understand the range of potential outcomes of a change for markets; for clients; for one's own business. I've long believed that Africa's revitalization in the 21st Century could ride largely on a wave of oil revenues. While this may still be true, the above suggests that the continent's windfall may ultimately end up being far less significant that I thought. (Being able to admit when one is probably wrong is also an important attribute of a good strategist!)
Which of course will impact on the continent's attractiveness as a global market for professional services over the coming decades.
Comments, as always, are most welcome. Please post them blow.
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One of the most compelling arguments against an oil conspiracy is the fact that most of the OPEC countries are not friendly to the Bush administration and would obviously do whatever they can to get him ousted, so it seems that market forces and speculation are still the driving forces behind gasoline prices.