sgentropy.blogspot.com -> straitstimes.asia1.com.sg :

Oil prices are not likely to go higher, Minister Mentor Lee Kuan Yew said yesterday [7 Mar 2008]. As crude oil prices hit US$105 (S$145) per barrel, MM Lee believes it is not likely to creep further up to US$110. 'The oil suppliers are testing the limits. They believe that China and India now form a new long-term base demand. They may be right,' he said. 'I don't think it can go up US$110, US$120, US$150 and the world economy goes on. Inflation will go through the roof. 'Economies of the West will go down, hyper-inflation in many developing countries. So it will go into reverse. There's no projection right to the end.'

- I found this gem in one of my referrer links from a fellow Singapore blogger. Inspired by this find, I put up a chart that vividly illustrates the fallacy of trying to call a top to oil prices. Like fellow blogger TM, I have great respect for the founder of Singapore, but the trillion-dollar world oil markets are bigger and greater than the words of any one man.

The man calls the exact same technical resistance levels as I have been talking about : $110, $120, $150 (and beyond that, I've been talking about $180 and $200). By the way, $110 is turning into a support level instead of resistance. He offers no other reason for oil not to be able to hit $110 other than that otherwise, Western economies will be hit, and there would be hyperinflation in developing countries.

Well, let's go back to Economics 101. Supply and demand. Everyone talks about demand, but let's talk about supply - we have reached peak oil in conventional light sweet crude back in May 2005. It is in the past, not much argument about that. The remainder of our global oil needs has been met so far by NGL (natural gas liquids), heavy oil, tar sands, oil shales, biofuels - and inventory liquidation.

An American-led recession notwithstanding, demand is growing in many developing countries, particularly domestic consumption in the Middle East countries, while supply is poised on the oil peak. Mexico's Cantarell, the world's second largest oil field, is declining 18-20% per year, and Saudi Arabia's Ghawar, the world's largest oil field, is strongly suspected to be in terminal decline as well. Today's "gigantic offshore oil field discoveries" are in the range of only a few billion barrels or thereabouts, enough to supply the world's needs for perhaps six months or so. And these offshore oil fields will not come online until the next 8-10 years, and when they do come online, they will surge to full production quickly, but then thereafter decline rapidly.

The only way for oil prices to come down is via a global depression and perhaps not even that, since in the First Great Depression of the 1930's, energy usage went down "only" about 8%, so perhaps it may require an all-out economic collapse. And that's not an outcome that even the peakoiler community would wish on anybody.

See also :

1. Crude oil hits $119.90 record on Euro breakout above 1.60
2. Crude oil hits record $117, breaking records 5 days in a row
3. Oil hits $111.00 high, breaking records 7 trading days in a row