Last week dropped the price of North Sea oil just below $ 50. Now Here we go again. Yesterday, oil prices fell below $ 49. As late as the beginning of December the price was $ 80 – and last summer $ 110.
But despite drop in oil prices, there is still excess oil in the market.
Thus continues the struggle between manufacturers to retain its market share.
Over the past few days the influential US investment bank Goldman Sachs lowered its forecast for oil prices in three months from 80 to 42 dollars.
Oil Minister of Saudi -Arabia, the largest oil producer in OPEC, declared just before Christmas that his country will continue to produce full even if oil prices fall to $ 20. Other should be forced to reduce their production.
We know less about the future of Norway than before
How low can oil prices go? And, more importantly, how long we will experience rates between 40 and 50 dollars?
Some have already concluded that the oil boom in North Norway is over before it began in earnest .
The answers may affect the image we had of Norway’s financial future.
Some have already concluded that the oil boom in North Norway is over before it began in earnest.
Lesson we had forgotten
In the short term changes in the price low for both demand for and production of oil. When the market is out of balance, it must therefore fierce price to remove surplus – or deficit – on oil.
It was therefore the price of oil rose to over $ 140 a barrel in 2008, driven not least by a rapidly increasing demand for oil from China and other Asian countries. But years later, when the financial crisis slowed growth in the world economy, oil prices fell for a short period to below $ 50.
Experience may suggest that oil prices rarely remains very high or very low for a long time.
But it is not always that history repeats itself.
energy revolution can change everything
We are experiencing a small energy revolution. New technology now makes it possible to extract oil from a new source – so-called shale oil.
That’s how oil production in the US has increased by fifty percent in five years.
Just as important as the which has now happened is what can happen. Many countries have untapped opportunities for extracting shale oil. Not least Russia and China are believed to have large deposits. The US energy revolution can be the beginning of a global revolution.
This happens at a time when economic growth is declining in China and several other countries as long contributed to rising oil consumption and high prices.
In other words: There are major changes on both the supply and demand side suggesting that low oil prices are not a temporary phenomenon.
backload draws up
are opposing forces that can pull oil prices up again.
A powerful fall in oil prices will increase the purchasing power of importing countries. Thus also increases economic growth and demand for, inter alia, oil.
With so low oil price which will now also oil production eventually reduced.
Some – perhaps many – producers of shale oil will have problems. Such fields are not expensive to build, but the operating costs are high. Some say the producers of shale oil requires a price $ 80 per. barrel to survive. Others say $ 40.
Oil companies have also already decided to spend less money on oil exploration and development, not least in areas where it is expensive to produce, as in the Arctic.
down, down and then up – but how high?
Oil prices could fall even lower during the spring as pessimism spreads – until the last speculator has sold out of the oil market. At the time the story that the oil price will have a recoil – upwards.
But we do not know where oil prices will eventually level off.
Saudi Arabia, which has the world’s cheapest oil, can never be outdone by price
What we do know is that the price in the long run must remain close to the cost to build and operate new fields both should cover increasing demand and replace old fields that go out of production.
Therefore we also know that Saudi Arabia, which has the world’s cheapest oil, can never be outdone on the price.
For Norway the picture is mixed. It is cheap to keep production running from the North Sea fields that still have large production. The new giant field Johan Sverdrup will also be profitable to develop even with very low prices.
Cost can be cut – and will be cut. But it’s hard to see now that the world needs such a high price that it may be profitable to develop new oil fields in the Arctic over the next five to ten years.
In the oil country Norway is the golden age behind us.
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