10 Fascinating Oil Charts
13 Mar
Erste Research Group’s excellent report on oil crunches some fascinating data on oil and its current short-term and long-term influence on the global economy. We picked ten charts to highlights some key findings from the report.
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Here is what Erste research says on the following topics:
On Middle East Unrest
“We do not expect this political tsunami to be stopped soon. The young population has no perspectives and rebels against the excessive bureaucracy, the unfair division of income, and the mountain of corruption. Whether the movement is edging towards Shiite theocracies or gradual democratisation is currently difficult to predict. But the democratic opposition is only loosely organised, which means that the scenario where the radical fundamentalists seize power is much more likely. One thing is for sure however, and that is the fact that we believe that oil will be traded with a substantially higher political premium in the future. In our opinion the largescale geopolitical fire and its effects are clearly underestimated.”
Impact of high oil prices on global growth
“The effects of the high oil price will soon feed through to the economic bottom line. According to the IEA the OECD nations spent USD 790bn on oil imports in 2010, i.e. USD 200bn more than in 2009. Jeff Rubin contends that the oil price increase in 2008 triggered the financial crisis and that the mortgage crisis was only a symptom of the high oil price. According to Rubin, high oil prices caused four out of the five most recent global recessions. This was on the one hand due to consumption, which is affected by the oil price, and on the other hand by the transfer of assets to exporting nations. For example, the transfer of petrodollars in 2008 amounted to USD 700bn in 2008, 400bn of which were going to OPEC nations.”
‘Low’ oil prices
“The illusion of a “low” oil price is probably based on the fact that many market participants regard the alltime-high of USD 147 in 2008 as benchmark. At its current level the oil price is more than 200% above its longterm average of USD 32.6. Even adjusted for inflation, oil is anything but cheap. At USD 35/barrel on an inflationadjusted basis, oil is traded clearly above its long-term average of USD 16.6/barrel. In other words, oil is expensive in a historical comparison, neither nominally nor adjusted for inflation.”
New oil production
“According to a study by the IEA10 the costs of discovering a barrel of new oil currently amount to USD 75/barrel. The IEA considers the increase a combination of rising labour and land costs and of waning output. Saudi Arabia regards USD 70-75 as cut-off rate for new projects, and the development costs outside OPEC are often above USD 100/barrel.”
Tags: Brent, crude, feature, Iran, Iraq, Kuwait, oil, oil production, Qatar, Saudi Aramco, UAE
The most interesting fact is that oil has to be at AT LEAST $75 a barrel to make it worthwhile exploring for new supplies. So either a demand collapse caused by supply inadequacy or by the discovery of substitutes will cause the price to fall, or the world economy will be paying $100 plus for oil, for ever.
Either way the old economic paradigm is dead.
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