We've all been stuck in a traffic jam at one time or another. Each one is an individual experience, yet every one of them is frustrating. This morning, I can honestly tell you, dear reader, that I was in the worst kind of traffic jam.

I had nobody to blame, however, because I was the one with the bright idea to take a different route to work this morning. Just before I was about to exit off I-95, the ramp looked a bit congested. Looking ahead, the highway was clear. I figured I'd just get off at another exit.

That turned out to be a two-hour mistake.

Passing the time turned out to be easier than expected. I had a conversation stuck in my mind. To be honest, it was more of an argument. And as usual, it revolved around oil prices.

"I'm telling you, Keith, there's no chance oil is going that high," a colleague began. "I just don't think we'll be able to support prices over $50 a barrel for very long."

Yes, you heard that right. You see, oil was roughly $40 a barrel at the time.

"Once OPEC kicks up production, we'll be back below $30 a barrel in a heartbeat."

"Well," I began, "OPEC production is the key, isn't it? Let's say the price per barrel does go that low. OPEC will just declare the oil markets secure and simply refuse to increase supply. I think prices won't just break $50 in the future, but we'll be seeing a new floor in prices."

He laughed at me. Now, I'm not a vindictive person by any means, but I'll admit I got some pleasure a few months later when oil jumped past the $50 mark.

I told my readers that we ran out of $40 oil in 2005, and $50 oil in the beginning of 2007, and what I'm going to tell you now might make you laugh at me . . .

We've run out of $60 oil, maybe even $70 oil.

Will OPEC Increase Production?

Tomorrow, OPEC is meeting in Abu Dhabi to discuss the possibility of raising output levels. Unfortunately, we can't expect to listen in on any secret meetings this time around. I think it's safe to assume there'll be a new set of video technicians.

Over the last few days, oil prices have been slipping (falling about 10%) on expectations that OPEC is gearing up for another production increase. The price drop, however, could give OPEC a reason not to turn the taps on. If the cartel is "comfortable" with the oil supply (they usually are) and oil prices remain at current levels throughout the winter, we may never see a barrel of oil under $80 again.

Believe me, I'm tempted to call up my friend to ask him what he thinks and see if he'll laugh again.

Perhaps asking if OPEC will increase production is the wrong question. Rather, we should be concerned about whether OPEC can increase output.

OPEC's massive reserves have already been put into question. Yet without the organization releasing data on the fields (don't hold your breath on that one, either), we'll never know how much trouble we're really in.

Oil Price Volatility

Iran is about to run out of ways to scare oil prices higher. A new U.S. intelligence report came out this morning concluding that Iran stopped its nuclear weapons program four years ago.

That news helped lower oil prices. Although Iran was quick to gloat over the confession, I think it could hurt them in the long run. Iranian oil production is in a bit of trouble. Not only is the country struggling to keep production up, but its domestic consumption is also growing considerably. Along with Venezuela, Iran has been a steadfast advocate for lowering production and raising the price per barrel.

This new report means the U.S. government will be hard pressed to find more reasons to complain about Iran's nuclear program. Trust me, I don't look forward to a nuclear Iran either. I guess President Ahmadinejad will have to find another group of sailors to kidnap to influence oil prices again.

Also remember that we hit the end of the hurricane season last week. Despite almost no activity during the 2007 season, it's just another factor taken out of the volatility equation.

In other words, we're running out of excuses.

Now we can get down to the real issue that's been driving oil to record prices year after year--the burgeoning gap between supply and demand.

Why should we be so worried, you ask?

Declining production will have some serious consequences.

Fuel shortages will become more frequent; spiking oil prices (as if we haven't gotten used to them over the last five years) will become a regular occurrence. It's going to get worse before it gets better.

But enough of the doom and gloom that some of you accuse me of, and let's look at what will happen. Our demand for crude is going to lead us to new sources of oil, and with that will come trillions of investment dollars over the next two decades. Whether you feel that investment will pour into new oil discoveries, current oil recovery techniques or alternative energy solutions, that money will be there.

That's not wishful thinking, it's a fact.

Until next time,

Keith Kohl

www.energyandcapital.com

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Fist of all, you must excuse me because of my poor english, because in come from Spain.
Any way the problem we are facing with the price of oil is affecting of living style and the econmy of this country, the value of the dollar and the future worl stability.
My questionis: Why do we have to wait years in reducing oil consumption, specially in transportation such as cars, trucks and other vehicles if we have the technology to do it right now?
I can bring information on patents issued by the US Patents and Trademarks Office in Washinton, as well as other patents pending, giving an inmediate response not only for reducing oil consumption only but to reduce air polution which force to invest millios of dollars a year.
Your articles are very very interesting. How goog would be that some financial aid could be at the reach of some new companies in order to develope said technologies.

for two extra hours you and car and ten million others sat in a traffic jam, thinking.sunspots.sunspots=global temperature change.where can i profit. Uranium.yum. oil $100.oo a barrel even better. The motor never turned off? Idled along.chug-a-lug. Nothing to do with me.

I think the article was quite good, however, in a typical Americanism, Keith states that there was barely any hurricane activity this year. If you lived in Mexico or Central America and had your house destroyed or one of your relatives killed by one of the Category 5 hurricanes that hit them this year, you'd probably disagree. Just because it doesn't hit the U.S. doesn't mean it didn't happen.

I've been doing my own research for the last seven year, just after Cheney's secret meetings with oil company CEOs. I received an email from Paul Goodman at the EIA. In their new report it tell of the 600 new oil fields leased this year in the US alone, two of the largest are in the Gulf of Mexico. In the report it says that it is estimated the there is over 100 billion barrel in the deep waters of the gulf, and that only 20 billon in the shallower water have been tapped, leaving 70 billion yet to be tapped. The east and west coast of the US, Colorado/Utah shale oil will soon be available. Also the South China Sea is estimate to have over 192 billon barrels, and that that estimated may be short by another 110 billion barrels. Off the coast of Brazil new deep water fields have been discovered and that 10 billion barrels will soon come on line, with more to come. Africa and India off shore drilling has already started.

In an interview with Charlie Rose (PBS) Lee Raymond former CEO at Exxon Mobil Corp said that with the new technology coming line that there is enough crude still in the ground to last another 250 years, and that with the new energy sources that we will see in the next ten year will extend the available crude even further into the future. So what all the scuttlebutt about "Peck Oil". I get the feeling that it's all just hype to justify by the Crude oil speculators.

We really have to think about the cause and effect on our economy by those who would have us believe that the end of the world is just beyond the next gas pump.