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Re: SC53

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November 19, 2007 07:37PM
http://www.northstarwriters.com/lk017.htm

Energy Angst: Long-Term Oil Gloom Spreads In Houston

Saudi Arabia has more oil, Amsterdam more tankers, New York more money, but Houston has the heart of the global oil industry. These days, it is not beating well. Study after study, executive after executive, and analyst after analyst is warning that there are rough times ahead for oil supply.

Here, oil news is analyzed, sorted and shelved. But in 37 years of writing about energy, in boom and bust, I have never found the kind of fatalism that now grips the oil patch.

The cause of the furrowed brows is simple: The global production and supply of oil, at between 85 and 86 million barrels a day, is straining the system. At those rates, supply and demand are in rough equilibrium which, according to many experts, should put the price at about $80 a barrel. The difference between that price and what we are paying (as much as $98 a barrel on some contracts) is a market premium extracted because of future fear – fear of war with Iran, fear that big oil producers will demand payment in euros, and simple fear that demand in Asia is outstripping the world's ability to produce much more oil.

The most gloomy predictions come from a loose agglomeration of economists and geologists who believe in the theory of “peak” oil. This is a view that holds that Saudi Arabia and other high-producing areas, have peaked and will begin to go into decline without enormous new discoveries and tremendous new investment that is not being made. The most persuasive voice of this gloom is Mathew Simmons, a Houston-based geologist and banker. Given the production realities, he believes that $100-a-barrel oil would be a bargain, and that the world should brace for $300-a-barrel oil.

In pessimism, Simmons is closely followed by Chris Skebrowski of the Petroleum Review in London. Skebrowski, who used to work for British Petroleum and the Saudis, believes that the world will be in oil chaos within five years..................
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