Tuesday, August 26, 2014

No more cheap oil - per Saudi Aramco

Peak Oil : "The problem is oil price needs to rise, not fall, to support continued capex. He refers to the problems rather succinctly but fails to address that wages are flat and with most consumer prices rising, consumers cannot support higher oil prices. In that scenario oil price will continue to fall and as it does high priced marginal oil plays will go offline. There won’t be any 40 mbd of scraping the non-conventional oil bottom of the cask to replace the easy to extract stuff. The economics just are not there.
Now the argument can be made that higher income individuals can afford to pay more, BUT the merchandise being moved is 75 mbd of crude. Start moving less to just satisfy the wealthy and with less tax money the rest of society falls into decay and chaos will erupt into riots.
It was refreshing though to hear a Saudi official admit what many of us already know."