Why oil could hit $180 a barrel
Just when crude is becoming more costly to extract and process, producers in three key countries are short of cash. And without that money, recent finds won’t do much good.
Why oil could hit $180 a barrel (full article)
By Jim Jubak
April 22nd, 2008
It’s that gap between production declines that are continuing and visible now and production increases that are speculative and in the future that will keep upward pressure on oil prices.
In the short term, the oil market is right not to underestimate the ability of the governments of national oil producers to shoot themselves in the foot by starving their national industries of capital. We’re likely to see a continuation of these self-defeating strategies among enough big oil-producing countries to keep oil prices climbing until global consumers finally say, “We can’t take higher prices anymore.” In that crisis, falling demand will break the upward trend in oil prices.
For a while, anyway. The logic of rising costs of production and falling supply from cheaper conventional sources of oil argues that oil prices could suffer a temporary correction on a fall in demand but that over the next decade at least oil prices will trend higher.