General Chat
Q:
Some oil executives worry prices may fall
By Jad Mouawad The New York Times
SUNDAY, DECEMBER 4, 2005
Hold on to your gas guzzlers: Cheap oil may once again be just around the corner. Even as consumers worry about high gasoline prices and rising heating bills, oil executives in London, Texas and Saudi Arabia seem to be concerned about a prospect of falling oil prices.
In a recent speech in Singapore, John Browne, the chief executive of BP, spoke of a possible sharp drop in prices and called current levels "unsustainably high."
John Hofmeister, head of Shell Oil in the United States, said during an interview, "This high price cycle is artificially inflated."
The notion of a steep falloff in energy prices may seem far-fetched.
After all, in the past year, the market has experienced crude oil prices that touched $70 a barrel; huge disruptions in the Gulf of Mexico; strong demand from the United States and from the world's fastest-growing market, China; continuing problems in producing Iraqi oil for export; and mounting tensions with Iran, a large OPEC exporter.
If anything, most of those situations would point to a sustained period of high energy prices. Most analysts said they expected crude oil prices to remain above $40 a barrel for the foreseeable future.
But the oil business has witnessed a succession of booms and busts, and oil companies have found it impossible to balance their future production with the world's need for oil. Too much capacity, and prices fall; too little, and they rise.
Today, producers are again under pressure to step up production and refining, and to increase investments to get more oil to the markets quickly. But oil executives and government ministers are concerned that if demand slowed down, even a little bit, those investments might create a large oversupply in two to three years, pushing prices down again.
Only a few years ago, the industry was dealing with a glut in production capacity, sluggish demand and a financial crisis in Asia. All of that led to an oil-price collapse in 1998, with futures contracts falling to about $10 a barrel.
Prices eventually rose, but the experience left a lasting impression among producers. As Saudi Arabia's oil minister, Ali al-Naimi, said recently at a news conference in Riyadh, "As producers, we don't want to build capacity without demand."
This recurring debate in the industry may seem odd. Recently, the theme has been the end of cheap oil, prompted by a surge in Chinese demand and a lack of spare production capacity. Traders' concerns that producers would struggle to catch up with consumer demand pushed prices to $60 a barrel from $30 in less than two years. Doomsayers saw signs that the world was running out of oil.
But there are indications that high oil prices may be coming to an end. After briefly topping $70 a barrel when Hurricane Katrina interrupted supplies from the Gulf of Mexico, prices have fallen on the New York Mercantile Exchange. Analysts at Citibank said oil might fall to $50 a barrel, and possibly less, in coming months.
"The big issue is what demand is going to be next year," David O'Reilly, the chief executive of Chevron, said by telephone. "High prices tend to attract higher production and higher supplies. The question then is, What will happen to the demand side? The fact is, we rarely know what is going to happen."
Naimi of Saudi Arabia said his country had "expressed a concern with consuming countries that it would be helpful for producing countries to have a better forecast and a more reliable projection of what demand is."
But Naimi, and most oil experts, know that predicting the future is more art than science.
In November, the International Energy Agency, an adviser to industrialized nations on their energy policy, pared its growth forecast for 2006 for the fourth-straight month. It now expects demand to grow to 85 million barrels a day next year, up 2 percent, or 1.7 million barrels from this year. This year, however, demand is expected to grow by 1.5 percent.
Part of the uncertainty lies in what is going to happen to the Chinese economy. In 2004, global oil consumption grew by 3.7 percent to 83 million barrels, more than twice the average annual growth over the past decade. China alone accounted for a third of that growth. Its demand for oil surged 15 percent.
This year, Chinese growth is expected to subside somewhat, expanding at a rate of 3.3 percent, according to the energy agency. Growth is expected to pick up again in 2006, though, rising an estimated 6 percent, thanks to strong car sales and electricity generation.
But such wild swings have led some analysts to express doubts about the reliability of information from China. The reality is that it will take some time before anyone knows for sure what Chinese demand will be.
There are other clouds on the horizon, among them fears of an economic slowdown in the United States and of an outbreak of the avian flu, which could cut international travel, hitting airlines hard and hurting regional economies.
In a widely read and much-discussed report, Cambridge Energy Research Associates, a consulting firm in Massachusetts, estimated that global production would grow by 16 million barrels - a jump of nearly 20 percent - by 2010, far outstripping the estimated growth in demand over that period.
For oil executives, the experiences of the 1985 and 1998 price collapses remain a stronger influence than their belief that the world has entered a period of more expensive energy.
Lee Raymond, the chairman of Exxon Mobil, said in his recent Senate testimony. "In the energy industry," he said, "time is measured in decades."
Raymond said that Exxon Mobil was involved in a $13 billion project in eastern Siberia that began 10 years ago and is expected to produce for 40 years.
"All told, that's more than 50 years for one project," he said, adding, "Fifty years ago, Dwight Eisenhower was president." He might have added that this was before the U.S. interstate highway system was built and sport utility vehicles became the vehicle of choice.
-----------------------------------------
12.804 @ 107.26 mph on crappy street tires with Dual SU Powered 2.9L Stroker!
ZCAR.COM member since Aug 1998
A:
Sweet, I'm rooting for it, but I'll believe it when I see it.
'73 Turbo, not much stock. Sold now... :-(
A:
damn, dont hold on to your gas guzzlers!! unless its a sports car, in which case, go for it! lol, seriously, not trying to start a war here, but why buy an SUV unless your going to A) go off road, or B) tow stuff?
A:
I read an article 3 years ago in financial magazine that said by 2007 gas would be close to $1 a gallon due to an oil glut!
Hopefully that will come true!!
Later,Norm
-----------------------------------------
12.804 @ 107.26 mph on crappy street tires with Dual SU Powered 2.9L Stroker!
ZCAR.COM member since Aug 1998
A:
If you have 6 kids then a Suburban is the only way to go. Minivans are gay!!! LOL
-----------------------------------------
12.804 @ 107.26 mph on crappy street tires with Dual SU Powered 2.9L Stroker!
ZCAR.COM member since Aug 1998
A:
hey, i drive a minivan! (its moms)... its the chevy venture, and its not bad (could use a manual tranny, accelerating can be a b*tch with the auto, but oh well)
A:
Oh man you just outed yourself on a public Z forum!! j/k haha
-----------------------------------------
12.804 @ 107.26 mph on crappy street tires with Dual SU Powered 2.9L Stroker!
ZCAR.COM member since Aug 1998
A:
haha, i have ridden in a Z though, doesnt that count to keep me in? :-p 'twas a 1986 300zx N/A (sadly, but oh well) with a couple mods
A:
On that chevy venture, keep an eye on the left wheel cylinder -- I've replaced 3 of them already, and all 3 had 50,000 miles or less
Anyways, to the original discussion -- I agree with clutchman
______________________________________________
'82 280zx -- 400+hp 355 sbc / T-56
'72 240zt - T3/T4 hybrid / TEC-II / not much stock
'82 280zxt - Stock...for now
'77 280z 2+2 -- Ongoing battle; currently in the process of "ricing
A:
eh... somethings wrong with the brakes right now -_- it won't pass inspection... ironic, none of our cars would pass inspection, and two of them are outdated
A:
Eh, don't feel bad that you drive a minivan, I gotta drive a Pontiac station wagon. On a better note, it does have a K&N filter in it though, that's gotta count for something! LOL!
Dave
12/70 240Z, L-28, flat-tops, N-42 head, N-33 intake, MSA 10-2002 cam, ZX ignition, early 5-speed, R-180,4:11 gears, 903 Blue paint.
A:
Gotta drop the prices so we don't get rid of the gass guzzlers. That way the next round of hikes will get us again. Prices aren't going to drop back to where they were before the spike. Solution: own gas & oil stocks.
Anyone can drive a new car.
A:
just convert over to alcohol, easy to do and you can buy alcohol for like 1.50 a gallon in 50 gallon drums. more HP lower engine temps cheaper fuel prices... less pollution and its a renewable resource.
1991 Pearl White TT A/T - e-mail removed from profile due to spam.
A:
Doesn't alcohol get less mileage per gallon??
-----------------------------------------
12.804 @ 107.26 mph on crappy street tires with Dual SU Powered 2.9L Stroker!
ZCAR.COM member since Aug 1998
A:
"Doesn't alcohol get less mileage per gallon??"
Yeah but if it's as cheap as Cali says and it's a renewable resource with added power and lower op temps, who cares if it gets less mpg?
God must love stupid people, he made SOOOOO many of them!
A:
Everybody knows you need an SUV to a) flaunt your pimp status with 24" wheels, or b) to get over those high speed bumps at Walmart.
I swear the two most useless vehicles on the roads are H2's and Excursions.
Morgan
1973 240Z 4 screw SU's, Tokico HP's, Toyota Calipers
1946 Willys-Overland CJ-2A (restoration in progress)
2006 Ural Gear-Up
A:
I switched over to alcohol too: but I don't seem to go anywhere but the bathroom on bourbon.
Ed and Jeanne's
ZXelda 1981 280 ZXT: ZXena 1990 300 ZX
1941 Buick Special Sedanette (Betty)
1956 Dodge Royal (Dorothy)
1971 Buick Riviera (Rita)
1975 Ford F-150 Stepside (Fiona)
1992 Firebird (Frieda)