Oil prices

LibDem Treasury spokesman, Vince Cable, has joined me in predicting falling oil prices. I don't know Cable, though we met once when (full disclosure) I was a press officer at Shell International and he was the Group's Chief Economist. I recall persuading one of his team in scenario planning that they needed to plan for lower prices. (Prices were then $25 a barrell, and the group was planning for minimum prices of $12 in the coming years. Prices actually fell to $8, which is what I had suggested).

Cable rightly points out that there is no shortage of reserves, merely a short term production capacity shortage; that oil companies don't invest unless they can at least break even on $20; and that tar sands and oil shale (which contains several thousands of years of supply) can be produced at $30 - so that is the long term ceiling. On the last point, he is pessimistic. Certainly if prices were stable above $30, companies would invest in exploiting such unconventional sources. But the technology to exploit them would then grow more sophisticated and cheaper. Prices would rapidly fall below $20 again.

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