Oil

Price Of Oil:
High Oil Prices Are Here To Stay. A Very Real Concern For Vehicle Owners!
United States of America (Press Release) August 21, 2008 -- It is simply not viable for the average family to spend anything more at the pump than what they are doing so today.

Very real and cost effective alternatives are available and it doesn’t have to be the purchase of a hybrid vehicle. The average vehicle can be run on a combination of fuel and water and the traditional secrecy behind this technology is rapidly becoming mainstream.

Make no mistake, oil prices are going to continue to increase and fuel prices very recently hit an all time high where gasoline was costing five dollars per gallon in America. The average American fuel consumer is still struggling to come to grips with high fuel prices but we haven’t seen anything yet!

OPEC continue to talk about cutting production at their future meetings and simply refuse to pump more oil. They have also recently increased their forecasts for oil demands and estimate demand reaching 113 million barrels per day by 2020. The world’s current production is 87 million barrels per day!

Surplus oil capacity has been falling since 2001 and output is falling at a rate of 5% per year. Output from the world's existing oil fields is declining at a rate of about 5% per year. Whilst new oil fields are still being found and new production is commencing, it is still not enough to keep up with growing demand. Current Exploration is not keeping up with production, either.

The Oil Depletion Analysis Centre, based out of the United Kingdom recently reported
that more than fifty percent of the world's 98 oil producing countries are already at the peak of their oil production.

In addition to these facts, the oil which is being discovered is going to be considerably more expensive to produce. Drilling costs in the USA have jumped significantly in recent years and off shore drill costs are around $70 per barrel. So, do the Math here, there is not a lot of profit margin unless oil prices continue to increase.

As oil prices get higher, supply could fall and drive oil prices through the roof!

A supply demand squeeze is almost inevitable and perhaps it’s going to arrive far sooner than we expect.
The world needs more oil supplies and it needs them fast. Oil prices have to rise in order to squeeze the demand out. It is one of the basic economic theories known as the law of supply and demand!

As the U.S dollar continue to fall against most major currencies. OPEC will cut production to ensure that oil prices increase proportionately.
OPEC currently accounts for 40% of the world’s oil production and a fall in the value of the U.S dollar has a major impact on their profitability. In fact over the past year, this represents a 15% fall!

OPEC has every reason to be concerned of a continuing decline in the US dollar and a simple solution to this is to reduce production in order to increase oil prices by the proportionate fall in the dollar. Voila, a neutral impact on profitability!

Now one may think that a continuing rise in the cost of a barrel of oil would have a devastating impact on the world economy, however up to this point, with the various milestones in oil prices, the world economy continues to power on.

Ironically with the significant production falls in the Mexican oil fields in recent times and various supply disruption in other locations, OPEC wont even need to drop production to in order to see oil prices increase.

Finally with emerging countries such as China and India- they is an inevitable increased in demand for oil, pushing prices up even further.

On the flipside of all of this, perhaps the U.S economy will reduce their demand for oil as they go further into recession!. Well, think again, China is more than capable, with the growth in their economy of taking up the slack!

High Oil prices are here to stay!