Publications: Notes at the Margin

Hard Truths about Oil (August 1, 2016)


Our title this week is a takeoff from a National Petroleum Council (NPC) report published in 2007 titled Hard Truths: Facing the Hard Truths about Energy. One hard truth about oil relates to the economic advantage of location. A second hard truth about oil relates to the determinants of demand. A third hard truth about oil relates to exploration and production. The "Ultimate Hard Truth," though, is that prices probably have to fall to low levels and stay there for some time. We read regularly that crude oil prices must rise to $60 or $70 or even $100 per barrel for supply to meet consumer demand. These views seem to reflect hope more than fact. The hard truth is that low economic growth and producer lethargy could hold prices down for years.


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