Oil demand surges, production cost falls

The world oil consumption is rising again. The price of a barrel is moving towards $100. By 2035, demand may reach 110 million barrels a day, about 20 per cent more than in 2009.

The interesting thing is that the cost of production has been falling. A few years ago, most firms thought that the breakeven price was $75 per barrel. But now companies such as Shell say new developments are economical at $50.

There are obstacles mainly because of the sheer dirtiness of the business. In America, objections to the import of bituminous oil are loud; domestic opposition to exploiting tar sands and building pipelines which has long been fierce is gathering strength. Global production of conventional oil, the stuff that can be recovered easily using drills and wells is near or already at its peak. Only a leap in output from unconventional sources will prevent new surges in price.

Even if countries around the world agree on measures to control CO2 emissions, tar sand oil, like Canada’s, must fill a supply gap in the future. With more than 70 per cent of the world’s remaining oil in the hands of OPEC, half of its free oil is in the tar sands.

And that’s a good reason for the Americans to want to exploit these tar sand reserves of Canada.

(Pic source: internet)

Fine wine and crude oil dance in step …

A bottle of the best wine can cost over $5000, whereas an equivalent volume of crude oil (about a liter) sells for a dollar or less. The bottle of wine may taste a little rough, yet fine wine and crude oil have more in common than you may think. Their prices have risen and fallen in step in the last 15 years.

Wine experts usually explain the price movement by supply-side factors such as weather and age. But supply has only a small impact on prices.