Oil crisis? | Aussie Stock Forums

mime said:

Anyone else think there will be a oil crisis in the near future? i think there will be so I’ve invested in oil stocks. It’s strange how not long ago I was hoping for the price of oil to go down and now it’s the oppisite.

In short, probably.

I have my own model which covers significant oil producing countries (over 60 of them) and includes tar sands, natural bitumen, deep water, gas liquids, polar oil, heavy oil etc in addition to the conventional light crude oil on which most focus.

There are unavoidably a number of assumptions which need to be made regarding both production and consumption.

With consumption, the main risk is the economy. For the purposes of the following timeframe I have assumed business as usual (though I do not necessarily expect that outcome).

For production, the risks are far greater and relate largely to the policies of the key producing countries with a low depletion rate and / or large unconventional resources. There are also significant geopolitical risks affecting many of these countries.

Assuming no major natural disasters or UNEXPECTED geopolitical events, a physical shortfall is likely to emerge sometime between 2006 and 2013 assuming BAU economic growth (China!). Risk in 2006 is solely due to geopolitical factors. Delaying beyond 2008 requires a substantial policy shift towards what is known as the American model of oil production.

So, overall if the economy holds up then I expect an oil crisis with the most likely date being near the end of this decade unless there is either a geopolitical event involving oil producers or it could be delayed by very large scale investment if such geopolitical event(s) were to produce a policy shift outcome.

It is a fact that any loss of production from Iran would need to be made up almost exclusively by either demand reduction or stock drawdown. The US Strategic Petroleum Reserve (SPR) could sustain such drawdown for approximately 6 months after which it would be completely empty. Total worldwide stocks, both commercial and government, could sustain such a situation for around 16 months before physical product shortages are likely.

There is now insufficient surplus production capacity to accommodate the loss of any significant producer. Strife in Venezuela, Iraq, Iran etc could INDIVIDUALLY send the market over the edge. The market could not accommodate an Iraq war or Venezuela strike in 2005 as it did in 2003.

Physical discovery of new conventional crude oil deposits peaked in the early 1960’s. Natural gas discovery worldwide peaked in the 1970’s.

I hold oil stocks.