Monday, October 13, 2008
Cheap Oil: Big Problems Loom
In a recent post, I noted that while oil consumers are rejoicing over the decline in crude prices and delighted at the prospect of further decline, the prospect of cheap oil should be raising warning flags all over the world, not just in oil-producing countries. This Rigzone article in fact points out just what I was saying, plus more. To get straight to oil, as you can see in the final two paragraphs, keeping the spigots turned on is getting progressively costlier. If oil gets too cheap, new oil field development projects would have to be scrapped, or would not even get off the ground because they would be unprofitable. Producers have to be assured of a high price in order to invest massive amounts of capital in oil field development.