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Oil be the judge of that…

Optimize Blog - September 21, 2009 - 0 comments

Do you ever get that “What are they thinking?” reaction when you see certain headlines in the news and wonder with incredulity how these people could possibly be suggesting something that seems to make little or no sense?
And so underinvestment in extracting oil reserves due to the global economy means there is going to be a shortage of oil globally by 2015.  This according to the top guy at Total – Christophe de Margerie. Mr de Margerie says that investment is needed now if supply is to meet demand going forward.
Now whilst there are signs of the economies of the world recovering, it’s not like the cry goes up “Recession over!” and we all go back to normal. Reluctance to invest will persist and who can blame the companies that are somewhat nervous – particularly when the “double dip” brigade are still suggesting that we’re not out of the fire quite yet?
What is interesting is that Mr de Margerie is of the view that the current price of oil is insufficient to kick start substantial investment in production and therefore the price of oil need to rise to somewhere over and above $100 a barrel to start to make this happen – and sooner rather than later.   This is yet another complexity along the road to economic recovery.
Can the economies of the world cope with oil prices rising as consumer and business confidence starts to grow once more?  The world goes from over supply and depressed prices to under-supply and inflated prices with scary frequency and we all know that the oil market is volatile at the best of times.  But what part yet do the speculators have to play in the scenario?

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