Oil Prices Need to Go Back Up!

November 24, 2008

As oil prices fall, we are less likely to push for green-tech. With the price for regular unleaded at just under $2/gallon, I am torn between celebrating at the pump and cringing because of what it means for alternative energy. And according to this article, oil is expected to continue falling.

NEW YORK (Reuters) – Oil prices could fall to as low as $40 a barrel next year as more efficient refining capacity comes online and production costs for some regions fall, Deutsche Bank said in a Wednesday research note.

“The most underappreciated issue is the combination of poor demand with major new refining capacity additions and the extent to which that will undermine light sweet crude prices,” the bank said in the note outlining the downside risk to its 2009 oil forecast.

“We believe that cash production cost ‘floors’ for the oil price are shrinking target (lower costs, stronger U.S. dollar), which imply a ‘V’ shaped downside to $40 a barrel crude around April 2009.”

Oil prices have tumbled from a record over $147 a barrel to below $54 a barrel on Wednesday as demand from large consumer nations across the globe wilts due to the economic crisis.

The bank said the new refining capacity additions will use 20 percent less crude to make gasoline and distillate than older capacity, cutting the need for crude and pressuring prices.

In addition, the research note said healthy supply increases from non-OPEC sources should also weigh on oil.

“Given the weak demand we see versus relatively healthy supply levels, we seek the cash break-even cost of marginal production as the floor for oil prices,” Deutsche Bank analyst Paul Sankey wrote, adding this floor was a “shrinking target”.

“As oil falls, costs fall, the U.S. dollar strengthens, further causing local (Canadian, Russian) break-evens to fall.”

OPEC members, feeling the squeeze of falling oil prices, will also face increased pressure not to cut production due to shrinking revenues, the bank said.

Source: Reuters

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One Response to “Oil Prices Need to Go Back Up!”

  1. Amer said

    well what do struggling taxi and semi-truck drivers, landscaping and construction workers have to provide us green revolutionary, our-world-is-organic folk? nothing better than alternative energy, right? after all, in the capitalist processes, there’re always sacrificial lambs on both ends, no? Bataille might have mistakenly assumed that the ‘accursed share’ (la parte maudite as homeboy called it) is only within marx’s category of fixed capital or consumption fund, we might call it ‘luxury’. but how about ‘human capital’ as bourgeois englishmen referred to labour? isn’t there a share of human beings we ought to relegate to mere consumption – not as consumers, but as consumed?

    let’s keep the human and class aspects of environmental struggles in mind. it’s not as people-oriented as one might want to think.

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