Saturday, April 12, 2008

can opec really afford $100 oil?

jim rogers thinks oil may go to $150 or even $200, and it might, but what will be its effect on OPEC? with a high oil price all alternatives to oil become viable. most of the national income comes from exporting oil. they are building massive State Funds that invest the Petro-dollars. these investments should provide returns long after the OPEC country stops exporting oil. the OPEC countries have decades of oil production left. if oil was consistently above $100, businesses would spend a lot of time and effort researching alternatives. if any alternative is found it could seriously harm the economies of the OPEC countries.

Current major OPEC economies.

* Saudi Arabia - 75% of budget revenues, 45% of GDP, and 90% of export earnings.
* Iran - 55% of budget revenues, 25% of GDP, and 80% of export earnings
* Kuwait - 50% of GDP, 90% of exports
* UAE - 30% of GDP, 50% of exports (This is after a massive economic diversification project)
* Venezuela - 50% of budget, 35% of GDP, 80% of exports.

Note: Not all countries listed; numbers are to the best of my knowledge, aka Wikipedia, and might not be totally accurate.

Alternative to Oil?

The single largest use of oil is for petroleum to power vehicles; nearly 53% of petroleum is used to run cars/trucks, etc. car companies are developing everything from electric hybrids to a semi that runs on natural gas (CNG/LNG) and even biogas. the reason behind this is the growing number of people around the world that want cheaper alternatives to petroleum.

it's not that big of a step to convert vehicles to run on biogas or hydrogen. yes, one can modify one's existing car to run on LPG/UNG/Biomass/Hydrogen and the kits are selling in developing nations for about $1000. does opec really want this catching on? the only way to avoid the widespread adoption of these alternatives is LOWER oil prices.

the second-biggest use of oil is for plastics, chemicals and man-made fibres, which is about 10%. with the high price of oil, the race to develop viable alternatives here as well. an example of ingenuity, clear plastic cups made from corn that are CHEAPER than normal plastic cups i found on other online sites, and these are compostable.

something to think about....

1 comment: said...

Imagine that you have oil reserves of, say, 1 billion barrels of recoverable oil that costs $10 a barrel to extract and sell. Would you rather sell it all asap for $25 per barrel, or sell only 1/4 as much per year, but at $100 per barrel?

If oil hit $500 a barrel THEN oil may become unsellable, and alternatives used in it's place. But at $100 or even $200 per barrel demand will only be constrained, not eliminated. The OPEC countries biggest issue is "peak oil" (ie. running out of the stuff), not "peak demand" (running out of people to sell it to).