Which Will Fall First? The Sky, Or the Price of Oil?

The Greens would have us believe that the price of oil is destined to climb indefinitely.

Maksimovich at Outsidethecube posts and interesting article that claims the opposite is far more likely.

Lord Browne, the chief executive of energy giant BP, has predicted that the price of oil could drop as low as US$25 a barrel, in direct contrast to a market that sees prices remaining sky-high.

The long-standing leader of BP, the world’s second largest oil company, said that while prices will not moderate in the near term, within five years, Lord Browne of Madingley saw oil coming down to US$40. In about a decade, he predicted the price could be as low as US$25.

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4 thoughts on “Which Will Fall First? The Sky, Or the Price of Oil?

  1. Hmm their doesnt appear to be much evidence in the herald article behind the claim. Granted if huge new oil deposits are found the price of oil will drop and increased efficeincy and new extraction techniques will help lower the price of oil. But oil will still eventually run out as it is a non renewable resource. With the current high price of oil, new exploration and development will inevitably occur and within the next ten years we should be able to see what the state of our reserves is like. As for alternatives to oil most are fairly expesive and are not as versatile as oil.

    I guess its a wait and see situation but buiding some alternatives to oil into our economy could be sensible if Lord Browne is wtong

  2. Competition from similar products with similar properties such as gas and coal are the prime drivers as well as increased efficiency in the electrical generation complexes in Asia which have returned demand growth to .1% in Asia.2007 and 2008 oil requiements in China are expected to return to 2002 levels and dropping each year till 2015.

    US natural gas and LNG levels are now lower then 2003.Significant uptake of LNG in the transport sector in the US will also significantly reduce demand.

  3. The last time people believed high oil prices were here to stay were after the oil shocks of the seventies and early eighties.

    Then from 1981 onwards the price of oil drop in real terms, i.e. the same dollar brought more oil.

    The price of oil will fall back to between US$20.00 to U.S$30.00 a barrel.

  4. Are you talking about $20 in today’s dollars, or $20 in inflated future dollars? In today’s dollars, no doubt. In future dollars, I doubt it. In constant (inflation-adjusted) dollar terms, oil has been getting cheaper virtually forever, and will continue to do so for a long time yet (people who talk about oil “running out” are insane), but Bernanke will inflate even faster than Greenspan, and the dollar price of oil will keep going up; I don’t think $20/bbl is likely again, barring some breakthrough extraction technique.

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