Thursday, August 12, 2004

Robert Feldman at Morgan Stanley agrees that $30/barrel oil is but a distant memory (even though we had it just nine months ago!).

My conclusion is that there is speculative excess in the oil market, and therefore that some drop of oil prices is likely in the short run. However, geology and statistics of production potential imply that the average real price of oil has risen. The oil market is asking the world to accelerate exploration, substitution, and -- the only long-term solution -- innovation. This is the Crisis phase of an oil CRIC cycle. The future of oil will be determined by how economies react in the Response phase.
Today Feldman is only interested in the science of petroleum exploration and production, and he claims the stars are quite simply aligned against us.
the statistical methods suggest that supply either has become, or is about to become, a more important constraint on the oil market. The reasons are not economic but geological. As Deffeyes says, it is �written in stone�.
This is, of course, only begging one to jump into the whole debate over Hubbert's Peak. Feldman believes it and that is his starting point.

I know nothing about geology; I'm more looking forward to Feldman's economic and political analyses tomorrow.

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