Must Read Article On Current Oil/Gas Prices

This article comes courtesy of The Oil Drum.

I only have 8 sites in my blogroll and there’s a reason for that.  While I do get requests for link exchanges and do consider them, I make a conscious effort to maintain the integrity of the blogroll.  The Oil Drum is one of the premier online sources for energy information.

While some may harbor suspicions that I recommend the aforementioned article due to confirmation bias (it’s possible!), I thought one of the most interesting insights of the article was a graph of whale oil prices, pre and post-peak production.  In fact, it’s so interesting that I reproduce it below (w/o permission — someone let me know if I’m out of line):

Without better background on the importance of whale oil in that economy and the rise of alternatives, it’s difficult to use this chart as a gauge for today’s possible price movements. Nevertheless, my takeaway is that it may be a mistake to assume that peak production implies forever rising prices; instead, I suspect future price movements to match the whale oil volatility as the globe struggles to adjust to the implications of peak oil production.

The author reaches a similar conclusion to mine (detailed in a previous post): sharp price declines in the energy sector may eventually lead to even more bullish conditions down the line as capital investment is deferred and alternative technology research is shelved.

Of course, the key question for investors is how much pain can we stand and how long will we wait for a payoff?

2 Responses to “Must Read Article On Current Oil/Gas Prices”

  1. Dax Says:

    Peter Beutel of Cameron Hanover was interviewed on CNBC or Bloomberg recently. He said that in the last 30 Bear Markels for Oil, the bottom was about 25% of the top. So his price target is $37, but maybe as lower as 20.

  2. Davy Bui Says:

    Hey Dax,

    I don’t know who Peter Beutel is but you never know, anything is possible. An oil price of $37 would be really bad news for our economy in the long-term. An oil price of $20 is probably bad both short & long term — what kind of recession would the world have to be in for oil to get to $20?

Leave a Reply