So over half of us guessed that we would be in the range from $50-100, which is pretty much where we've been. It would have been interesting to see how many would have guessed specifically that we would stay in the $60-80 range for months as we have done. I personally expected more volatility than this, but any recovery is likely to lead to another spike and crash.

I'm doubting now that any recovery will be robust enough to cause a new spike much above $100. OECD imports seem to have peaked and may go down for the indefinite future. I happen to think that this and similar sites and the authors they promote had some, however slight, roll in this. With the meme out there that the oil shock was something more than a one-off thing, many seem to have decided to permanently change their lifestyles. Of course, many more had lifestyle change thrust upon them.

I agree with others that if we go very far above $80 (an envelope we are now pushing), economies will contract enough to bring the price down again.

Happy New Year to all. Any New Year's resolutions being made (or broken) yet? I'm going to give veganism a go--though I already nearly put cheese in my oatmeal or milk in my coffee this morning. Wish me luck.

If I had to deliver conjecture fast to my partners, bosses, etc., it would sound about like this:

(a)Saudi Arabia says "fair value" for crude oil is around $80. I would have to be presented really good incentive to argue against the Kingdom, they know this business well. So as a first bet, I would side with KSA for now.

(b) What depletion is occurring seems to be a wash given the slow recovery of oil consumption, which I have long predicted to be much slower than some expect. Now, other analysts are starting to say the unthinkable, that oil consumption has probably already seen it's all time peaks in most of the developed nations (Europe, Japan, U.S.)whether there is available oil out there in the world or not, the consumer is beginning to move (or be pushed) away from oil in various ways, and with the pressure to reduce carbon emissions this will certainly continue.

(c)Worldwide credit is beginning to loosen a bit, and the best possible thing to really get the investment community back into energy development (oil, gas and renewable) would be a summer price spike upward to about $100 per barrel. I think there is a good chance of that happening with crude oil by August, and then a drop back down, but natural gas seems set for a longer price slide than expected. A lot of industry that once used natural gas in a big way has been outsourced. Trends on weather early next winter will mean everything for the longer outlook, but unless it goes arctic, natural gas seems set to hold or drop in price. It is easiest to store in the ground for now, what is the incentive to drill?

(d)We are only talking next year, so barring unforeseen geopolitical events, it may look a lot like this year. On geopolitical isses, I do not dismiss some uncomfortable thoughts: A war between Iraq and Iran is not impossible, and would create a real mess. If the economy slides in Mexico, we could have some real social disorder there, creating another mess and this one close to home for Americans.

Lastly, once again I ask everyone to really study the technical changes taking place. We are at the cutting edge of one of the most radical leaps forward in technology in many decades. Despite the enabling power of the technology advances of the last 3 decades , we should recall that almost all of them are in a very narrow area of technology, i.e., information control and communications. The coming wave of technology will be much broader, much more critical and much more disruptive to our homes, cars, workplaces and even methods of wealth production. This is a time of what Alvin Toffler once called a "wealth production" revolution. Please, do not easily accept assumptions and theories from others. HEDGE, stay flexible, be careful, and make changes in steps you can easily reverse if need be. There are going to be many surprises, and you may be amazed at the variety of possibilities that are opened up.

Happy 2010!
RC

I have no idea what will be the price of oil in future, but I want to share a vision of our "unreal reality".

Sorry for not translating. Google translator generates an acceptable English (from Spanish).

http://translate.google.es/translate?u=http%3A%2F%2Frenovablessinlimites...

http://translate.google.es/translate?u=http%3A%2F%2Frenovablessinlimites...

Happy New Year.

Ah ha - pontifications as to future possibilities of the oil price kind. I love conjecture because it requires zero proof, but lots of educated guessing.

1. Lately the price of oil seems to be glued into the 75-80 dollar range. It almost seems like the oil business as a whole very carefully calculated what the maximum the economy could handle and settled into that small range.

2. One concern of mine may seem strange at first glance. The first time the price of oil went skyward (147) it was a massive credit bubble bursting that caused its sudden downward descent into the 30's. However, the next time the price goes above a hundred a barrel, there might not be that safety valve available to bring prices down.

3. Now what we may have is a market that is ignoring bad news, like from Dubai, more billions to GM, empty malls - subdivisions and even an empty city in China, banks holding millions of properties empty so they don't bring down prices on the open market for existing homes, more layoffs, foreclosures and business' shuttering, huge state and fed debts with greatly reduced revenue, but apparently only upward movement in stocks. No matter what bad news there is, upward on onward seems to be the direction we are headed.

4. Thus, expansion will slowly build in here in the U.S. and more quickly in China, with demand for oil increasing as 2010 marches on. By July-Aug. the price of oil will be close to breaching 100.

5. If the economy holds at that price, by the end of 2010 price of oil will be between 100-120.

6. I'm predicting 125 is the new ceiling price. Once there in 2011, some bad news similar to Lehman in 08 will cause a price drop into the 50's. Notice how price doesn't get up to 147 again, or down into the 30's. That's because it won't be such a surprise next time and people know the parameters of what is possible, so the range gets smaller.

7. So I am predicting another economic earthquake, a pulse of a high price followed by a lower price, but not until mid 2011.

I think there is more meaning in the question: How do you think the value of the dollar will compare to the value of oil through the coming year?

My usual answer is that its been a mystery how the dollar continues to hold its value, and a wild guess as to whether it can stagger on at current levels for one more year...

I am reading "Thinking in Systems" by Donella Meadows (Club of Rome).

What we have here is a strong feedback mechanism.

The scarcity of oil causes a price spike, (perturbation), the price correction overshoots and returns to the highest that it can be, and held there by strong feedback from the economy. Any higher and the economy is strangled, any lower and the economy takes off causing increased demand which feeds back as higher cost oil.

This is a good thing as the alternative, without strong feedback, would lead to price instability or with no feedback to a crash taking out the economy and civilisation.

What we can expect is a more gentle wind down to that overused word "sustainable" future.

If one looks at percapita oil consumption in the US across a number of states with large variation in both average income and the local economy one finds that it does not vary that much.

http://www.statemaster.com/graph/ene_pet_con_percap-energy-oil-consumpti...

You need to disregard the oil producing states as they are not correct.

Most states are very close to the weighted average of 23.

This suggests that their is and intrinsic or infrastructure based use level that fairly independent of personal wealth. If oil supply falls near or below the level to meet this basic demand then we will probably see high oil prices regardless of growth or shrinkage of the economy barring outright collapse.

Given we have seen a steady rise in oil prices despite sustained high unemployment it makes sense to suspect we are not that far off from this intrinsic demand level.

Also US VMT has stopped falling again and continued to increase despite the combination of rising gasoline costs and rising unemployment.

http://www.fhwa.dot.gov/ohim/tvtw/09octtvt/figure1.cfm

Next the US economy has for the most part stabilized I'd argue its weak but again we seem to be hitting a sort of bottom.

If so then I'd argue its likely that we will see a continued increase in oil prices if supply is dropping. Export land alone suggests this will happen if one assumes that we are now post peak and also suffering absolute declines then this will continue.

On the financial front governments around the world are now willing to take any action required to avert economic collapse thus another collapse is unlikely over the short term. Certainly the US for example could move to subsidize gasoline prices for the poor for example or other aggressive measures to blunt the impact of rising energy costs. Other governments are likely to try similar policies. Perhaps the US would be forced to take action as others try to offset the effects of rising energy costs.

Of course such actions esp if they became widespread would simply make matters worse but I just can't see any country allowing its weakened economy to collapse further because of high oil prices. It makes sense that several will take aggressive action to insulate their economies and if enough take this route it forces others to take action.

Its probably a very safe bet to assume that China will do what ever it takes to blunt the impact of rising oil prices and they have enough dollars to subsidize oil for a long time. If so then they alone are enough to force other countries towards subsidies. India for example etc.

So overall I simply cannot see high oil prices being allowed to naturally cause economic contraction.

And I think that the US and probably many countries are much closer to what I call structural usage thus further drops in usage levels become exponentially more difficult as fundamental changes are required.

If such a situation develops its effectively economic warfare and will eventually cause some economies to blow up.

At some point if such a scenario does play out then one has to guess that free market oil will become a thing of the past as countries cut deals with oil producers for exclusive access in exchange for all kinds of incentives besides money.

I could readily see China for example agree to develop a large number of nuclear reactors for a oil producing nation in exchange for oil its a win win situation.

So we just have to wait and see what happens however if you think about it many countries have already massively increased the level of government debt they literally cannot afford to allow their economies to collapse as now it would be a complete collapse. Japan for example is at the point of no return for sure. If high oil prices become a problem it basically has no choice but to subsidize given their debt levels another bought of economic contraction is probably the death knell for the Yen.

I'd argue the US is in the same position it simply cannot allow another contraction as it would become obviously bankrupt at that point. There is now a incredibly long list of countries that have expanded government debt to save their economies to the point they really don't have any choice but try any prevent contraction at all costs or default.

So it fairly obvious if this is true then a vicious circle will be set in motion with subsidies shielding consumption and thus resulting in higher prices forcing more and more countries to adopt ruinous subsidies or fall into economic collapse.

Thats my prediction for 2010. As far as actual prices goes who knows ? There really is no limit if this scenario actually happens.

You know I can't remember where I voted that we would be in those ranges.

Over these past few weeks I have had several things to think about, and one of them is that we can't predict what will happen from day to day because things just aren't as easy to predict before they happen as we all seem to think that they are.

What prevents oil from going to 100 Dollars a barrel in the new year 2010? A war could happen, a bombing of a port could happen, Things that we don't see now could happen to change things as they seem to be slated to happen from this point in time. If notthing like that happens, Oil should in my opinion stay in the range of 50 to 100 dollars a barrel by this time next year 2011.

Now I hopoe I can remember that I said all this up there in 2011.

Best Wishes for everyone this year.
Charles.

On New Year's Resolutions

I'm only making one New Year's Resolution this year: I resolve to reduce my carbon emissions by 10% in 2010.

Lucky for me, there's low hanging fruit available in my household, so I expect to easily exceed that target (we're really aiming for 20%). To help others I compiled a list of 10 tips for making a 10% reduction in 2010: http://bit.ly/10in10steps . Most of these ideas will be old hat to TODers--I'd love to hear suggestions on how to get another 10% after we do all that, too!

I was inspired by the UK 10:10 movement http://www.1010uk.org/. Not finding anything similar in the US, I've also created a Facebook group http://bit.ly/1010fbgrp.

In the coming year there remains the possibility of 'risk pricing' playing a major role in the price of crude. Any significant increase in risk pricing by the market would render most projection models invalid.

On the economic front the U.S. is likely to once again see a reduction in consumption. America's all-time high was in the area of 20.6 Mb/d. Today it is closer to 18.6 Mb/d.

To quote API's 'Facts at a Glance' for December.

"Distillate deliveries for November averaged just 3.69 million barrels per day, the
lowest for that month in ten years. This November's deliveries were down nearly 12 percent
from the November high of 4.18 million barrels per day reached in 2006. "

Given the very serious economic downturn affecting the disposable income of so many Americans, in addition to recent mileage improvement goals, it seems probable that the U.S. will once again see a reduction in its consumption of crude for 2010. A further 5% reduction in U.S. consumption year over year is entirely plausible. I.e. A million barrels per day decrease.

What is even more likely is that the increase in use of crude in China and India combined will more than offset the decrease in U.S. consumption. China is adding on the order of 7 million new cars every year while India is adding another million. Adding in the vehicles of all class will of course increase these numbers.

The rest of the OECD countries will likely continue to add only a small amount of growth to crude consumption. Russian consumption on the other hand will likely continue to rise meaningfully.

Most Gulf countries will continue to see a significant percentage increase in their domestic oil consumption through 2010. Though they will remain as yet minor players in the consumption game.

If the year unfolds with only these factors making themselves felt there will nonetheless still be a meaningful upward pressure on the global price of oil. Especially if production of crude and condensates is unable to climb over 2009 levels. The limited studies that have been done in this area suggest the effect would be in the range of a 25% to 50% increase in the global price of crude over today's prices. I.e. $95 to $114.

The joker in the deck for next year remains the same as it was for 2009. How much will political unrest interfere with oil production and distribution?

Two studies have correlated the following effects from a decline in oil production.
Scenario A) A 4% reduction equals a 177% increase in price. 'Oil Shock' scenario
Scenario B) A 15% reduction in supply would lead to a 550% increase. Brookings Institution

If we are allowed to "pontificate" and get ridiculous..
I say $65 and this is how I get there:
this should be fun... at least to pretend anyways...

The U.S. rising interest rates at the end of Q1 2010, will cause an increase in adjustable interest rates on loans taken out by American "Big Agra" co's and smaller farms. Food prices, in America will climb a small, but significant amount. This will cause justifiable speculation, on the CBOT and thus a spike in global food markets.

As the price of food goes up, there will be a "lag" time between the spike, and the price difference reaching farms that produce them. During this "lag" time, "Potash" producers will begin to drive HARDER bargains as they know farms must start buying again:
"Standoff over fertilizer prices imperils world food supply"
http://www.theglobeandmail.com/subscribe.jsp?art=1336858

By April, the collapsing global "potash" market:
Russia-India potash deal to force price rethink -BPC
http://www.reuters.com/article/idUSLB45620720090711 and the fact that Potash producers know farms NEED to to start re-buying it, [at much higher prices] will raise the terrible possibility that global food production could decline by 30% by 2011.

Farms either can not afford the potash that is now becoming scarcely available,
or because food prices are so high, it is in their interests to plant -LESS- crops.
[OPEC cutting production, provides economic justification of such actions]

This will exasperate, horrid food insecurity conditions in North East Africa:
ETHIOPIA Food Security Alert December 30, 2009
http://www.fews.net/docs/Publications/ET_12_2009_%20OL%20Alert_final.pdf
Kenya Food Security Alert December 24, 2009
http://v4.fews.net/docs/Publications/Kenya_Alert_December_final.pdf

These events will lead to more extreme desperation and thus, more piracy off the horn of Africa, causing ever higher insurance shipping rates. Less traffic thru the Suez Canal, less income for Egypt to import Wheat to feed its people. [Egypt is the worlds #1 Wheat importer]

If not also a Muslim brotherhood coup, or some other take over Egypt:
"Many Egyptians seem distressed at the idea of a Gamal Mubarak presidency."
http://csis.org/multimedia/audio-house-rising-son

All of this, hurts Asian exporters.

The nation of Yemen will also see massive spikes in violence, and Piracy off its coasts. As a result of declining oil production revenue, and little ability for the gov there to feed its people: violence and desperation should be expected to spread in the south as well as north. These events: a result of food insecurity, tribal hatred, religious extremism and "Geo-political influences".

Saudi Arabia will be FORCED to "intervene"... Again:
http://www.presstv.ir/detail.aspx?id=115138&sectionid=351020206

This event will cause a price spike in crude oil prices, that hurt Asian exports, and place a further "cramp" in international food aid budgets to Africa. Higher crude prices, = higher gas prices= less money spent on food aid, and more to move food logistically.

This event will cause West African states, to once again "Panic" and stop exporting food to their neighbors, as the costs of -IMPORTING- food will become "too high". They will not export -NO MATTER THE PRICE- as they did in 2008:
"The Food Chain Hoarding Nations Drive Food Costs Ever Higher" http://www.nytimes.com/2008/06/30/business/worldbusiness/30trade.html?hp...

Such an event will have GRAVE implications for south east Asia food security:
"Running on Empty: South Asia's Food and Fuel Crisis"
http://csis.org/files/media/csis/pubs/sam121.pdf

As well as India:
"India faces hyperinflation in food and essential commodities"
http://www.indiadaily.com/editorial/21263.asp

This event will cause -more- political instability in Chad, who is ALSO suffering in the food crisis:
"CHAD: Drop in cereal production and poor pastoral conditions in 2010"
http://www.fews.net/docs/Publications/Chad_Alert_2009_12_fr.pdf

Causing a drop in in Crude oil production there,
further sending prices higher. ...Further hurting Asian exporters.

These events will also have an Effect on food security in Nigeria:
"NIGERIA Food Security Outlook January to June 2010"
http://www.fews.net/docs/Publications/Nigeria_ol_2009_12_en.pdf

... causing crude oil production to decrease as:
"radical Islam in northern Nigeria" spreads:
http://www.cfr.org/publication/21062
and Violence by "Mend"
http://en.wikipedia.org/wiki/Movement_for_the_Emancipation_of_the_Niger_...
and other armed groups end their cease fire W/ Nigerian gov, as a result of higher food prices, and higher crude prices that they do not benefit from.

HURTING Asian Exports.

As famine, civil unrest, war, drought, and poverty deepen across most of north and central Africa, the raw materials Asian depends on can not be produced at a rate that is necessarily to sustain China's economic grow rates.

Given that higher crude prices hurt exporters, AND the drop in US credit access
importing these materials to Asia, from South America, to sell them to ANYONE
may not be economically viable.

This "slow down" will cause the bursting of China's housing bubble:
"Housing bubble threatens China's boom":
http://www.theglobeandmail.com/news/world/housing-bubble-threatens-china...

These events will do massive damage to investor confidence, in Asian assets. International investors will rush to security and buy U.S. treasury bonds. As this takes place, more and more Chinese workers cant find work, and begin to openly call for a new government.

This unrest will lead to a collapse of Communism in China. That event, will trigger a collapse of North Korea, as no other nation would be willing to support them. This will lead to million of starving illiterate persons, to "flood" into South Korea, thus wiping out the incomes of 1/3rd of -ALL- South Korean workers.

"OPLAN 5029 - Collapse of North Korea"
http://www.globalsecurity.org/military/ops/oplan-5029.htm

If such events take place, I believe, it is reasonable to conclude Crude oil would be trading around $65 in December 2010. Given that it would take at least 10 years for investors to regain confidence in Asia.... -2020- when PEAK OIL is SURE to be doing MASS damage....

By default, I -MUST- believe that if these events prove real, the economic situation in North America would be such, that trillion dollar investments in renewable energy WOULD and COULD be made in short order. Thus, we would avoid a "Mad max" decline of North American civil society, and a "SOFTER" and slower, landing, at the end of the oil age.

Or am I not allowed to dream? LOL!

I think 2010 will resemble 2009. We are unlikely to go into terminal decline in 2010, I’m sure that’s too soon. There is some spare capacity again because of the recession. Unless Americans start driving again like before the recession, which I doubt, then a minor uptick in the American economy will not change demand from us. The Chinese and Indians are slowly chipping away at spare capacity but it will be several years before they make up the difference causing another spike in oil prices.

However, there is always a small chance the world may be hit by a wild card. A major hurricane hitting a strike in the heart of offshore oil platforms in the gulf…, terrorism along a major pipeline or something like that…, Somali Pirates manage to pull-off sailing away with an oil tanker (ok, maybe that one is far fetched)…, etc.

Barring any surprises, I think 2010 will be like 2009 so I’m guessing prices will be $75 to $100 dollars a barrel, but I’d like to reserve the right to change my mind at anytime.

Regarding oil price, look at this link.

http://www.oil-price.net/

On the chart showing oil price, at bottom is 1M 1Q 1Y 5Y

Run your cursor ove 1Y (1 year) and it will show the last year of oil prices. You'll notice the overal trend is up, but also there are periods of pricing that look like mountain ranges with brief periods between that look like valleys.

This trend, if it continues, seems to show we are headed into a new period of price increases, a mountain range topping out at about 85 dollars per barrel in the near future. Should be interesting to see if that pans out.

Moscow throws down the gauntlet to OPEC

http://www.arabnews.com/?page=6&section=0&article=130627

Russia and OPEC, two of the main energy chess board players, how will it play out?

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The Chinese must be scared to death of peak oil to be dreaming up this.

http://greeninc.blogs.nytimes.com/2009/12/31/chinese-shipping-company-mu...

Interesting point is that, the Chinese will pull out all stops in not letting their growth be held back by arriving at the party when all the easy oil is nearly gone.