oil slumps to $44.20, page-2

Yes it must be fun trying to forecast oil prices. I happen to be bearish and see it recovering back to the $100 level in a couple of years but staying low for some time, maybe a year or more. However saw an interesting suggestion that the Saudi's (with 16% of the world's oil reserves?) were becoming concerned about the greenie's claims of stranded fossil fuels.

The story goes that the Saudis didn't want to get caught with reserves left in the ground when nobody wanted oil and so are on a determined path to cash in their reserves while they can. This would depress oil prices for a long time, but not even the Saudi's would want sub $50 oil for an extended period, so even under this scenario the price should drift higher but maybe stay around $60 for a long time.

I don't give the suggestion much credence as I can't imagine the Saudis believe anything the greenies say - nothing - zip.

However if the argument had any basis, it would fundamentally change energy economics round the world. It would kill renewables, probably stall the expansion of shale and halth the growth of LNG. LNG plants already built would probably still be economic because oil linked LNG prices would still be attractive enough to buy and probably sufficient to keep the producers whole.

It is likely that local gas markets would be the least affected, USD50 oil is about USD8.2/GJ or AUD10/GJ gas. So local gas markets should be dandy for producers.

Makes you seriously wonder at the wisdom of the MEL Board dumping local gas projects to bail out a company depended on high oil prices for US EOR projects, especially when most of the MEL cash really only seems to be propping up a couple of the major ELK shareholders.