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Maxwell: Oil to $300 by 2020

Guest post by: Paul Kedrosky

Article Overview: Thoughtful comments on oil from veteran oil analyst Charlie Maxwell in weekend Barron's:

Maxwell: Oil to $300 by 2020

Thoughtful comments on oil from veteran oil analyst Charlie Maxwell in weekend Barron's: What's the current capacity for global oil production?

We are producing about 87 million to 88 million barrels a day, and I would put global capacity at another five million barrels on top of that. So our capacity is about 92 million to 93 million barrels a day, and I see our capacity as reaching perhaps as much as 95 million barrels a day at the peak in about four or five years, probably around 2015. But I think production will go very modestly above that point, if at all, and, in effect, we will reach a plateau. It will be a little bumpy in 2015, 2016, 2017 and 2018. But by 2020, the first signs will become very evident that we can't go any higher than that in production. So we will begin to settle very slowly and gradually in a world in which we need more oil each year, but we can't get more.

How high will the price of oil go?

By 2020, I'm looking for about $300 a barrel, which is closer to $225 a barrel in today's dollars. So it reaches a production plateau around 2015 or 2016 and stays flattish on a bumpy plateau until about 2020, at which point output starts to recede slowly.

... At what point do those price increases start to put too much pressure on the world economy?

Strangely enough, I don't think that it would bring the economy down. Rather, it is the suddenness of change that does that. That rise we saw three years ago, where in one year it went from $62 a barrel on average to $100, created a huge amount of economic damage. On a more gradual scale, and giving the effect of inflation its due, we will probably simply walk away from two-tenths or three-tenths or four-tenths of a percentage point of potential gross-domestic-product growth, which we will give up by being caught in this energy vise. But the world economy will advance, and it won't be brought down by this. However, it will touch off a huge effort to change the cars and the aircraft engines-and to use a greater amount of substitutes for oil, such as coal and natural gas. And, of course, this has a lot of positive aspects as well, because in the longer term, we would have to begin making these changes anyway. But it seems that we can't be asked to do that. We must be forced to do that, and price is the means by which that force is applied.

More here.

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Article Tags: barrons, maxwell, oil analyst, thoughtful comments



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Re: HABIT:... The Helper of Entrepreneur - [quote="bmueller47":1xzzk7v2]Hi topeyinka, When I read your post, my thoughts were refreshed with the words below: Just for Today...... Just for today......I will choose and display the right attitudes. Just for today......I will determine and act on important priorities. Just for today......I will know and follow healthy guidelines. Just for today......I will communicate with and care for my family. Just for today......I will practice and develop good thinking. Just for today......I will make and keep proper commitments. Just for today......I will earn and properly manage finances. Just for today......I will deepen and live out my faith. Just for today......I will initiate and invest in solid relationships. Just for today......I will plan for and model generosity. Just for today......I will embrace and practice good values. Just for today......I will seek and experience improvements. Just for today......I will will act on these decisions and practice these disciplines, and Then one day .... I will see the compounding results of a day lived well. by John C Maxwell in the book: Today Matters. I hope that helps someone.[/quote:1xzzk7v2] Thank you for these words. It is already changing me.


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