Will oIl prices continue to fall or will they rebound?

Danilo Anton

Oil prices are rebounding from the lowest level in a long time. On January 20, 2016, WTI petroleum barrel dropped to less than 27 dollars. It seems that this acute slump was related to the crude oversupply. On the one hand the United States kept high storage levels and fracking production remained high. Saudi Arabia and other petroleum producing countries did not cut pumping and Iran is starting to export very soon. The glut also relates with the abundance of hydrocarbon fields in continents and ocean platforms. No peak oil production is forecasted in the near future.

However, these are not the only factors that influence prices. There are technological and financial limitations to what can be extracted, there are political issues, and of course there are speculations

We must remember that some producing countries such as Russia, Venezuela and Iran do not have friendly relations with financial markets. Low prices are weakening their economies and political strength. Obviously, many big buyers are not worried about that.

However, if we remember what happened in past price slumps in the past is very likely that prices will rebound and will reach the 50 dollar mark per barrel very soon.

The reason for this future increase that can be predicted is a very likely decrease in investments in expansion of existing fields and a stop of exploration in peripheric regions.

This cyclic changes in prices appear to be normal every 5-10 years and are not related to actual abundance of the crude in the depth of the Earth,

In fact, according to the abiotic theory on the formation of oil and natural gas, there are enough hydrocarbons for many centuries, perhaps millennia.

There are limits, of course. Some fields are in unreachable locations with present technology. Although in the most productive areas it has been observed the recuperation of some wells, due to recharge from deeper levels, intense pumping may exhaust the oil existences. Finally, there is competition from other sources of energy. Probably in the near future oil will substituted by eolian, solar, hydro or nuclear or other sources of energy producing methods.

The complexity of the subject makes difficult to predict the future development of the petroleum extracting and consuming industry, but one thing we can say. Although at a human scale, hydrocarbons are inexhaustible,  new technological procedures may reduce their importance in the future and, perhaps, also their prices.

In summary, the development of petroleum and natural gas and their prices are unpredictable and will continue to be so for a long time.
"Unexhaustible, Petroleum and Natural Gas", Danilo Anton, Piriguazú Ediciones.