$100 Oil is Inevitable

Some savvy commentary from CERA’s Dan Yergin today. He argues that oil supply and demand have becoming increasingly "decoupled" from oil prices, and the result is that we are only mad mullah (or equivalent) from $100 oil.

Peak oil, at work, right? Not necessarily, according to Yergin. Read on:

“Although publics and governments around the world are focused on prices, one of the most important factors in the world oil industry is the rapid rise in costs owing to shortages of people, equipment, and skills,” he told the Georgetown University conference.  Citing the IHS/CERA Upstream Capital Cost Index, he said that a new oil project today would be priced at 70 percent more than a project that was launched just three years ago.  “The increased costs are leading to delays and postponements of oil and gas projects,” he said, “which is affecting the timing of future supply.”


  1. it’s coming…we’re now seeing some extreme predictions in biz press…everything from $60 oil to $200 oil a lot calling for pullbacks in $60 range…..once again i’m following t. boone’s lead i think its going $100 plus pretty soon…..we have supply depleting…demand up and dollar down…..pk

  2. To support Dan’s comments, anyone following the development of the Alberta Oil Sands can only agree. The key variable in the go/no go decision on new oil sands projects isn’t the stock market, price of oil, sources of capital or even government royalty rates — it has been the limitated supply of human capital and skills that can be economically deployed. $10B projects have doubled in cost in less than 2 years…which makes getting an appropriate return very challenging.

  3. I predict that by the end of 2008 a barrel of oil will cost more than a share of Google stock. 😉

  4. One Way Stox says:

    If you haven’t heard — Dan Yergin’s book THE PRIZE — THE EPIC QUEST FOR OIL, MONEY & POWER is one of the best.
    …almost a FOUNDERS AT WORK about the discovery of oil & the men who built the oil industry.
    You’ll love it.

  5. It’s not just labor costs. Steel and other materials have been increasing as well. Having oil priced in a depreciating currency creates a partial illusion of great gains for non-US producers.
    I think EOR will be getting lots of attention:

  6. carmichael says:

    how does a small investor capitalize on rising oil? A specific commodity etf?

  7. Brer Rabbit says:

    Pretty funny. PowerWave Technology will install a vibrating sleep mattress in the privacy of your home for only $1,995! Pure bunk.
    The dynamic pressure created by a wave in the open ocean is miniscule. Pulsed through petroleum, a damping fluid, into a microstructure trap, any pulses would damp out to nothing in mere feet, long before reaching the next production well.
    But if you want to waste your money, I have some tar sands I’ll sell you up in Alberta! The only people who made money up there were the original land consolidators who sold out to the explorers, who made their money off duping investors. Unless they can dupe the taxpayers into building a gas pipeline to heat the sands in-situ, the strip mining version of tar recovery will quickly be unprofitable, and an environmental catastrophe.
    In the final analysis, it’s just tar, stinking goo, distillates only recoverable at exorbitant costs being side-streamed off the audit books!
    The whole Peak Oil thing is a bookkeeping fabrication, oil companies too enslaved to their shareholders and cheap pre-GWOT crude at $15/bbl, they bought sweet futures rather than build the desulfurization units they were getting tax credits for complying with!
    We got ripped off by Big Oil, once by them cheating on tax credits, twice by them driving up the price of sweet crude futures instead of building sulfur recovery, already an advanced technology or EPA wouldn’t have been able to require it, third by bidding on more futures than they actually take delivery on, creating financial panic buying, and finally, their GWOT, and don’t believe for a moment Big Oil has clean hands.
    Peak Oil is about deliberate supply depletion, and has nothing to do with the old saw about high cost of labor, capital and equipment. Big Oil hasn’t built any refineries in a coon’s age, but they keep running them on a wing and a prayer at 130% cap, which is amazing, when you consider Saudis admitted ca 2000, pre GWOT, that they could make a nice profit way back at $25/bbl.
    Where are those bazillions going? Private hands.
    Government-Corporate Socialism and Christian- Zionist Fundamentalism created a perfect storm. Through GWOT, the Neo-Zi’s have re-found their lost Reich of a Thousand Years.
    And you paid for it.

  8. Carmichael: “how does a small investor capitalize on rising oil? A specific commodity etf?” There are a number of ways..yes there are etf/etn now available that reflect different aspects of the oil industry as well as common stocks of major oil companies and service providers…the most direct way is thru futures contracts, for small investors there are now mini contracts available on crude oil…you get more leverage with futures (which can be a plus or minus), better tax benefits: 60/40 longterm/shortterm and the ability to directly invest/trade the oil market without putting up huge margins…feel free to contact me if you have any questions…Patrick Kerr

  9. Interesting oil conversation here! Wanted to let everyone know about a book that was recently released last week on the subject of oil and the Caspian area (former USSR) that may be of interest, check out this site and blog: http://oilandglory.com/

  10. Oil will keep going up as long as the dollar keeps falling and as long as oil is denominated in dollars.