the magazine that fast-forwards your career.
Here's how to read the magazine:
by clicking the arrows at the side of the page, or by using the toolbar.
by clicking anywhere on the page.
by dragging the page around when zoomed in.
by clicking anywhere on the page when zoomed in.
websites or send emails by clicking on hyperlinks.
Email this page to a friend
Search this issue
Index - jump to page or section
Archive - view past issues
Real Business : Issue 3 2008
LOWDOWN BLACKGOLD LOSINGLUSTRE RISING OIL PRICES HAVE CAUSED ALARM AROUND THE WORLD Not only has oil consumption risen Petroleum, their pain seems justified, as the national average retail price for unleaded petrol rose from 146 cents per litre to 164 cents in the 12 weeks to 27 July 2008. “Consumers are not necessarily victims in P 30 this so-called ‘crisis’, because they adjust to higher oil prices and act accordingly,” argues Peter Pontikis, group treasury strategist, Suncorp-Metway. “American consumers, for example, have greatly reduced their demand for oil during the last three months, equiva- lent to something like 4 billion less driven car miles.” But even as we cut back on its oil consump- tion, global disparities between the supply of, and demand for, “black gold” will place upward pressure on oil prices. “Oil production output from non-OPEC producers has not risen since late 2003, while global net exports of oil have declined throughout 2006–2007”, explains Gerard Burg, economist – minerals and energy, National Australia Bank. etrol, it seems, is synonymous with pain these days. TV news bulletins are filled with stories of everyday motorists struggling to find the extra cash needed to fill their tanks. According to the Australian Institute of among oil-producing nations in the Middle East, but China, which currently consumes well over 2.5 gigabarrels of oil annually, is poised to overtake the US as the world’s largest oil importer. “As a result,” says Burg, “net importers such as Australia and the US have been competing for less traded oil, driving prices higher.” Another contributing factor is the fall of the once-mighty greenback. “We’ve witnessed the decline to 40-year traded weighted lows in the value of the American dollar,” says Pontikis. “This, in turn, made oil in non-US dollar terms relatively cheaper, thus spurring demand-driven, inflationary pressures.” The combined effect of these forces has seen the trebling of crude oil prices during the past three years, as the cost per barrel briefly nudged US$150 earlier this year. Alarming figures like these have prompted many to ask if we’re about to experience a decidedly unwelcome 1970s flashback – namely, a global oil crisis for the 21st century. Some, like Pontikis, who prefers to use the phrase “oil stresses” as opposed to “oil crisis”, aren’t so sure that history is about to repeat itself. “While current oil demands have placed stresses on businesses and household budgets, Australia’s fully employed economy now faces a different challenge to the oil shocks of the 1970s, when subdued growth BY KEVIN PATRICK REAL BUSINESS ISSUE 3, 2008 and persistent inflation were the problems of the day.” Some politicians have debated the merits of cutting the current government fuel excise, thereby providing some financial relief to voters – sorry, “motorists”. Yet few industry observers would agree that such a move would actually address the underlying issues that currently drive oil prices. “The days of cheap oil at, say, around US$20 per barrel are long over,” claims Burg. “The costs of oil production are rising as more and more oil is derived from harder-to-access reserves, located deeper underground and offshore.” The financial and logistical difficulties asso- ciated with the continuing search for new oil reserves only underscores the belief, held in some quarters, that we are now close to exhausting the planet’s oil supplies and that more efficient extraction methods will only help to consume what little is left, faster. But the world of oil is a lot like Hollywood, a place where, as screenwriter William Goldman once remarked, nobody knows anything. Statistics about current oil production levels, especially from closed and secretive oil-producing nations, can be politically moti- vated and therefore distorts our view of the global oil picture.
Issue 1 2009