I have a question for all economic analysis experts.  What will be the price of crude oil (per barrel) in the international market by the end of year 2009? When I checked this morning I found it was $ 71.35. It will be interesting to see how close you can come with your prediction after couple of months.

Oil Discovery Highlights BP's Resurgence, Gulf's Bounty

By ANGEL GONZALEZ

HOUSTON -- After being the theater of major setbacks for BP PLC, the U.S. Gulf of Mexico is becoming the main stage for the oil giant's return to grace.

A giant deepwater oil discovery in the Tiber field disclosed Wednesday is likely to increase the London-based oil company's footprint in the region, a mature province that's proving its resilience in the face of offshore frontiers in Brazil and Angola, which have lately dominated the spotlight. About 8% of the oil and gas BP produces comes from the U.S. Gulf.

The announcement shows that "BP is executing quite well" its program to further exploit the Gulf's riches, said Pavel Molchanov, an analyst with Raymond James.

BP is the biggest producer in the Gulf, to the tune of 400,000 barrels of crude oil and natural gas a day. There, the company runs the second-largest field in the U.S., Thunder Horse. BP also operates the largest U.S. oilfield, Alaska's Prudhoe Bay.

The Tiber discovery, which could hold more than 3 billion barrels of oil equivalent, follows another massive nearby find in the Kaskida field in 2006. If both are developed, they could boost BP's output in the Gulf to around 650,000 barrels of oil equivalent day during the next 15 years, said BP spokesman Robert Wine. Globally, BP produced about 4.1 million barrels a day in the second quarter.

In 2010, about 14% of crude oil production in the lower 48 American states will come from four deepwater Gulf of Mexico oil fields - two of which, Atlantis and Thunder Horse, are operated by BP, says the U.S. Energy Information Administration.

For BP, these discoveries will boost the relative importance of its North American portfolio, which already represents about 40% of BP's global business.

BP was not always so triumphant in these waters. The company took a hit to its reputation and bottom line earlier in the decade following a cascade of events in the U.S. The producing platform for the Thunder Horse field was delayed by three years before starting in 2008. Atlantis was also postponed. A 2005 explosion at BP's Texas City refinery killed 15 workers, and the company agreed to plead guilty to criminal environmental charges related to the blast. U.S. regulators in 2006 sued BP for manipulating the propane market. Later that year, BP was forced to shut down a bulk of the oil output at Prudhoe Bay following the discovery of corrosion in some pipelines.

Shortly thereafter, Royal Dutch Shell PLC eclipsed BP as the world's second-largest energy company in terms of market capitalization after Exxon Mobil Corp.

"All of the things that happened to BP in North America...all of that's behind them," said Raymond James' Molchanov.

BP underwent a management shakeup in 2007 and, in January, appointed Lamar McKay as the new president for BP America. McKay played a key role during the company's difficult negotiations with its partners over the strategic direction of a joint venture in Russia. It was believed that BP, at one point, wanted to expand its presence in Russia, but those hopes were dashed after the Kremlin moved to strengthen its grip over the country's massive resources by reducing the access it gives to foreign oil companies.

BP shares in the U.S. closed 4.1% higher at $52.53, outperforming its peers.

Welcoming Waters

BP's latest discovery, one of the deepest oil fields ever drilled, highlights how the Gulf of Mexico can hold its own as an exploration province despite its relative maturity: It saw its first well out of sight of land in 1947. "It's still got a lot of life left in it," said Leta Smith, a consultant with IHS CERA in Houston, referring to the U.S. Gulf. Bob Fryklund, a consultant with IHS, said that the Gulf, thanks to deeper areas made exploitable by new technology, is part of the offshore "Golden Triangle," that also comprises West Africa and Brazil.

Brazilian offshore finds are the largest - Petroleo Brasileiro's Tupi field is estimated to contain some 8 billion barrels of oil equivalent - while many Gulf discoveries range in the 1 billion to 2 billion of oil equivalent ballpark, said Fryklund. Kaskida and Tiber, BP's two discoveries in the Gulf's newest geologic play - the so-called lower tertiary - are on the larger side of what is found in the Gulf. BP is the largest acreage holder in the lower tertiary.

Brazil's attractiveness could be somewhat dimmed by a major shift in oil policy. On Monday, Brazil's government followed the lead of other resource-rich countries such as Russia and Venezuela by proposing new laws that put the state-owned oil company in the driver's seat of development of newly discovered reserves, leaving international oil companies a secondary role.

The U.S. Gulf remains one of the last places in the world where international oil companies can count on relatively stable regulation.

"In general, the industry views the Gulf of Mexico as a durable fiscal regime," said Matthew Snyder, a consultant with Scottish energy consultancy Wood Mackenzie.

http://online.wsj.com/article/SB125193142246381215.html

At least we got two predictions from Gabbar Singh and kingofmorons. Let's see whether more people will show their interest. As kingofmorons pointed out due to OPEC's strategies and discoveries of new reserves the price can stay pretty flat (but not sure!). However, Washington may switch its interest on natural gas in long run which is considered cleaner than oil but there are several technical and other uncertainities associated with it.

Can Natural Gas Break Our Oil Habit?

By Thomas K. Grose

Natural gas is the only fossil fuel capable of getting good press these days. Its fans regularly rhapsodize about its merits, calling it an extraordinary fuel that's cheap, domestically abundant, and clean. Well, cleaner than oil, at least. Meanwhile, everyone from Texas oilman T. Boone Pickens to the Sierra Club is promoting natural gas as the key that America needs to free itself from its century-long addiction to oil. After all, the nation's appetite for oil means that nearly 60 percent of the petroleum consumed each year must be imported, much of it from unstable or unsavory regimes in the Middle East, Africa, and Latin America.

Pickens, along with a growing number of groups, wants America to slash its oil consumption by making better use of natural gas. In theory, the plan sounds simple. Around 22 percent of the natural gas burned each year is used to generate electricity. If wind energy were substituted for gas at power plants, the freed-up natural gas could be used instead to fuel ground transportation systems, starting with diesel-burning fleet trucks and buses. Advocates say this plan could cut U.S. oil imports by up to 38 percent.

Yet if the nation makes the switch from oil to natural gas to run its vehicles, will it simply be trading one foreign-dependent fuel for another? The answer is, probably. But to what extent is very hard to say. "Welcome to uncertainty," says Gordon Kaufman, a professor emeritus and oil and gas expert at the Massachusetts Institute of Technology's Sloan School of Management.

http://www.usnews.com/articles/news/energy/2009/03/05/can-natural-gas-break-our-oil-habit.html?PageNr=1

Crude oil futures traders at commodities exchange, such as New York Mercantile Exchange (NYMEX or NY Merc) take into consideration a whole host of disparate factors (not excluding such odd non-market factors as the personal health of rulers of large oil producing countries, or prediction of higher than expected winter temperatures, hurricanes, labor strike, pipeline or tanker accidents, etc. in addition to the market supply and demand) in buying or selling crude oil futures, thus determining market prices of crude oil, and yet they seldom are able to come up with precise prediction. Their trade is speculative, rather than based on statistical prediction. They keep their eyes open for non-market triggers for market trends in crude oil supply and demand.

If you think stock market is volatile, commodities market is much more so. Barring tumultuous events in the Gulf or other oil-producing regions, like military attack on Iran by the U.S., the only safe prediction I can venture to make is that the crude oil prices aren’t likely to reach the highs of last year. Historically, the crude oil prices have jumped after such tumultuous events, as the chart in the link shows: http://www.wtrg.com/oil_graphs/oilprice1947.gif.

Simply put, it's hard to be precise to come up with a dollar figure, let alone down to two decimal cents.

So, I'll take that $71.35 prediction with much more than a pinch of salt… more like two sacks of it.

My $0.02

Ken Fisher is a rich, successful investor and a money manager... so he must be doing something right.

I agree with AP, fossil fuel is definitely going to be replaced by other alternatives in long run. However, future projections of petroleum production are always not true. Several people just use the total proven reserve in the world today and divide that number by the production rate. I don't konw why they overlook petroleum resources which are yet to convert into reserves. Many believe that we are in peak oil and petroleum will last only for 25-30 more years.

THE OIL RESERVE FALLACY
Proven reserves are not a measure of future supply

To begin with, one of the most revealing speeches about world oil reserves went unremarked in 2006. The head of the world's largest oil company, Saudi Aramco, said:

“We are looking at more than four and a half trillion barrels of potentially recoverable oil. That number translates into 140 years of oil at current rates of consumption, or to put it anther way, the world has only consumed about 18 percent of its conventional oil potential. That fact alone should discredit the argument that peak oil is imminent and put our minds at ease concerning future petrol supplies.”  

http://www.runet.edu/~wkovarik/oil/

US is certianly not in favor of hydro-electricity rather it can switch to natural gas as Washington is looking for cleaner energy. China, however, seems to be interested in developing more hydropower. Considered as the cleanest energy for long time hydroelectricity has also gained some environmental criticism. Some of these seem merely hypothetical, however, some have real impacts.

Hydropower Doesn't Count as Clean Energy

http://www.alternet.org/environment/64445/

Well, I think same with natural gas also. If we just look at Raju's data which show that the total reserve of natural gas in the world was 6,200 trillion cubic ft  on 2004 with the consumption rate of 100 trillion cubic ft./yr, we might think that the total volume of the gas should have been depleted by now. But if you look at the figure given by EIA , you will find that the reserve is increasing. The total reserve of the natural gas was 6,254 trillion cubic ft on Jan 1st 2009 with total consumption rate of 106 trillion cu. ft.

Actullay, we have huge volume of resources than the volume of reserve which is being converted into reserve continuously. There is too much development in technology that companies are extracting gas even from unconventional sources like shale which was once thought to be useless or only source rock. After discovery of methane coal gas, this is huge breakthrough in energy industry which is going to take that supply year far away from 60.

Again after getting couple of prediction on oil price by the end of year 2009, I am also going to put mine one, which I hope will stick around $72/bl.

Who says that we are in peak oil position right now and running out of it very soon?

There are discoveries of giant oil fields one after another.  Couple of weeks ago it was BP and coupld of months earlier Chevron also had announced discovery of another giant oil field.

http://www.chevron.com/News/Press/release/?id=2009-02-05

Geology tiger, i do understand what you are trying to say, ya fossil fuel might be increasing as per you say and as per your research but don't you think the consumption rate is also alarming every now and then. Do you know, number of chinese automobiles is increasing about 5 million per year, leaving rest of the world alone? We have 6.5 billion humans currently what about 75 million that are added every year. As per the research conducted by demographers, it projects a population between 8 and 10 billion by 2050. What do you think about the impact ?

Let me give you one example,

The United States with about 4.6 percent of world's population consumes about 25 percent of all oil. Do you know there are about 1.3 billion people in China alone. Its annual per capita GDP is about $4500 per year and is increasing. What do you think if Chinese alone, reached that stage where they match the American level of consumption? And please think about the rest of the world too!

Water sustains life, Energy sustains civilization!

Steve Sonnenberg,

Raju161,

You wrote that you are getting what I am trying to put here. And again I am not denying this fact that there is no other way than looking for alternative energy to supply the demand of energy in the world. But my point is that the way people are predicting that we are running out of petroleum energy pretty soon that in not true. Instead we are accumulating the volume of petroleum resources. However, this is not going to happen forever. So two things: We have to develop the alternative energy resources before we run out of petroleum resources. And also we have to utilize most advanced and sophisticated techonology (which has been already developed) in environmentally friendly way to extract possible petroleum resources.

China is not going to explode population anymore, and so does India. Moreover, China is showing more interest in developing hydropower and coal rather than exploring oil. However there will be certain increase in energy consumption by these two countries.

src: wikivisual.com