Scott Barbee on future oil consumption

Generally, oil demand has been dominated overwhelmingly by long term consumption growth trends in Asia, as China, India and other developing countries relentlessly increase their per capita oil consumption.  Such trends are also quite likely to continue well into the future, despite the multitude of political narratives de rigueur against fossil fuels, as 7 billion people on earth who consume an average of 3 bbls/yr desire to live like the other 1 billion who consume an average of 16 bbls/year.  Increased use of low-cost, fossil fuel energy remains critical to the alleviation of poverty and a more inclusive global economic development, with fossil fuel energy demand unlikely to easily or inexpensively be supplanted by alternatives through government fiat.  Goldman Sachs' commodities analyst Jeff Currie recently pointed out that $3.8 trillion in investment in renewables has been spent over the last 10 years.  These expenditures have been financed to a large extent from taxpayer handouts and through other government market distortions.  However, despite all these costly expenditures over the last 10-years, the share of total global energy consumption met by fossil fuels has only dropped by one percent, from 82 percent to 81 percent.

~ Scott L. Barbee, portfolio manager, Aegis Value Fund, "Aegis Value Fund H1 2023 Portfolio Manager's Letter," Seeking Alpha, December 13, 2023

Sheldon Richman on the discovery of oil in the Middle East and its role in U.S. foreign policy

If the chief natural resource of the Middle East were bananas, the region would not have attracted the attention of U.S. policymakers as it has for decades. Americans became interested in the oil riches of the region in the 1920s, and two U.S. companies, Standard Oil of California and Texaco, won the first concession to explore for oil in Saudi Arabia in the 1930s. They discovered oil there in 1938, just after Standard Oil of California found it in Bahrain. The same year Gulf Oil (along with its British partner Anglo-Persian Oil) found oil in Kuwait. During and after World War II, the region became a primary object of U.S. foreign policy. It was then that policymakers realized that the Middle East was "a stupendous source of strategic power, and one of the greatest material prizes in world history."

Subsequently, as a result of cooperation between the U.S. government and several American oil companies, the United States replaced Great Britain as the chief Western power in the region.  In Iran and Saudi Arabia, American gains were British (and French) losses.  Originally, the dominant American oil interests had had limited access to Iraqi oil only (through the Iraq Petroleum Company, under the 1928 Red Line Agreement).  In 1946, however, Standard Oil of New Jersey and Mobil Oil Corp., seeing the irresistible opportunities in Saudi Arabia, had the agreement voided.  When the awakening countries of the Middle East asserted control over their oil resources, the United States found ways to protect its access to the oil.  Nearly everything the United States has done in the Middle East can be understood as contributing to the protection of its long-term access to Middle Eastern oil and, through that control, Washington's claim to world leadership.  The U.S. build-up of Israel and Iran as powerful gendarmeries beholden to the United States, and U.S. aid given to "moderate," pro-Western Arab regimes, such as those in Saudi Arabia, Kuwait, and Jordan, were intended to keep the region in friendly hands.  That was always the meaning of the term "regional stability."

What threatened American access to the region?  Although much was made of the Soviet threat, there is reason to believe that throughout the cold war Washington did not take it seriously in the Middle East.  The primary perceived threat was indigenous--namely, Arab and Iranian nationalism, which appears to have been the dominant concern from 1945 on.  "The most serious threats may emanate from internal changes in the gulf states," a congressional report stated in 1977.  Robert W. Tucker, the foreign policy analyst who advocated in the 1970s that the United States take over the Middle Eastern oil fields militarily, predicted that the "more likely" threat to U.S. access to the oil would "arise primarily from developments indigenous to the Gulf."  The rise of Arab nationalism or Muslim fundamentalism, or any other force not sufficiently obeisant to U.S. interests, would threaten American economic and worldwide political leadership (and the profits of state-connected corporations).  As Tucker wrote, "It is the Gulf that forms the indispensable key to the defense of the American global position."  Thus, any challenge to U.S. hegemony had to be prevented or at least contained.  As Secretary of State John Foster Dulles said privately during the Lebanese crisis in 1958, the United States "must regard Arab nationalism as a flood which is running strongly.  We cannot successfully oppose it, but we could put sand bags around positions we must protect--the first group being Israel and Lebanon and the second being the oil positions around the Persian Gulf."

~ Sheldon Richman, "'Ancient History': U.S. Conduct in the Middle East Since World War II and the Folly of Intervention," Cato Institute, August 16, 1991, p. 2

Henry Kissinger on the control of oil in the Middle East

Oil is much too important a commodity to be left in the hands of the Arabs. 

~ Henry A. Kissinger

Tom DiLorenzo on Big Oil's ability to manipulate gasoline prices

The American oil industry started out in a laissez-faire environment in which there was little, if any, government regulation and no income taxation.  Entrepreneurs like John D. Rockefeller were able literally to create one of the most important industries in world history from nothing.  In doing so they transformed the world, made the machine age possible, improved the standard of living for millions, created hundreds of thousands of jobs, and invented management practices that would be emulated by other capitalists around the world.  Capitalism, or market entrepreneurship, is what created all of these economic benefits.  But from the early twentieth century on, the oil industry has been a regulated industry and has become less and less capitalistic.  Today the industry is heavily regulated - strangled, some would say - by governmnt.  And inevitably, government regulation - not the capitalistic nature of the industry - causes high prices, shortages, and other problems.

Still, the myth persists that the industry's capitalistic nature is precisely what creates problems.  Indeed, virtually every time there is a jump in gasoline prices the oil companies are accused of "price gouging," their profits are reported on the front pages of America's newspapers, and, more often than not, some congressional committee commences an investigation or holds hearings to look into the matter.  During the so-called energy crisis of the 1970s the accusastions against the oil companies were more strident, as the seven largest companies - "the seven sisters," as they were called - were accused of somehow orchestrating a shortage to boost their own profits.  But on the face of it, the notion that a price-fixing conspiracy can periodically increase gasoline prices makes no sense.  If oil companies are able to raise prices in such a manne, why don't they do it all the time?  Why only every several years?  Why do they throw all that money away by holding prices down?  And why are the incapable of stopping oil prices from falling?  (During the 2000 presidential election vice president Dick Cheney appeared on Meet the Press to say that oil and gas prices were too low and that some kind of government "price stabilization program" was needed.  At the time, he had just left his position as a top oil industry executive.)  The obvious answer to these questions is that the oil companies do not have the price-fixing powers that the mainstream media - and anticapitalistic intellectuals - ascribe to them.

~ Tom DiLorenzo, How Capitalism Saved America, pp. 206-207

Christine Lagarde on the impact of sharply lower energy prices on the global economy

There will be winners and losers, but on a net-net basis, it’s good news for the global economy.

~ IMF Managing Director Christine Lagarde at The Wall Street Journal CEO Council annual meeting, week of December 1-5, 2014

(The IMF attributes roughly 80% of the fall in oil prices to supply-side causes, such as fuel-efficiency standards and decisions by the Organization of the Petroleum Exporting Countries, and only 20% to declining demand from slowing growth.)

Bill Miller on the risk of a black swan in Saudi Arabia

The chances there [Saudia Arabia] of a very significant shutdown of oil are relatively, I'll say relatively, small. They're not vanishingly small, but they're relatively small.

~Bill Miller, chairman and CIO, Legg Mason Capital Management, CNBC's Squawk Box, April 6, 2011

Marc Faber on crude oil

I still think in a risk/reward view oil is a very attractive commodity.

If you take a very optimistic view of the world namely a global economic recovery, demand in the Western World will pick up and demand in the Emerging World will continue to rise strongly, so from a very optimistic point of view you should be long oil.

[On the flip side,] if you take the ultra bearish scenario, like I do, where you think everything will collapse, that there will be World War III and collapsing countries in the middle East, then supplies will be curtailed and prices will go up.

~ Marc Faber, "Accumulate gold and Japanese shares, says Marc Faber,"Business Intelligence Middle East, March 25, 2011 (quoting Faber from a recent CNBC interview)

Jim Cramer on deflationary oil prices

Don't forget: declining oil is deliciously deflationary, something that will keep Ben Bernanke's inflation-fears in check and allow interest rates to stay low for longer periods.

~Jim Cramer, "Curb Your Enthusiasm?", Mad Money, May 13th, 2010

T. Boone Pickens: $95 oil by end of 2010

You'll be at $95 a barrel at the end of the year.

~ T. Boone Pickens, as appeared on CNBC, April 14, 2010

(Crude oil at $85/bbl.)

T. Boone Pickens: $150/bbl oil by end of 2008

I think you'll see [oil prices at] $150 a barrel by the end of the year.

~ T. Boone Pickens, June 20, 2008

(Oil was then around $135 a barrel. By late December it was below $40.)

Thomas Donlan on Peak Oil

We have no idea how much oil is still to be found. What we do know is that the more oil prices rise, the more oil will be produced. Furthermore, the more oil that is produced, the more likely it is that prices will fall.

A quick look around the world finds uneconomic oil in many places. Venezuela has more oil than Saudi Arabia, if you count its ultra heavy crude and tar sands. Canada has more than Saudi Arabia, if you count tar sands. The U.S. has more than Saudi Arabia many times over, if you count its oil shale and coal, which could be converted to gasoline and diesel fuel.

Price is the problem, not geology.

~ Thomas G. Donlan, A World of Wealth (2008), p. 14

International Energy Agency revises sharply downward oil-supply forecast

The oil investments required may be much, much higher than what people assume. This is a dangerous situation.

We are of the opinion that the public isn't aware of the role of the decline rate of existing fields in the energy supply balance, and that this rate will accelerate in the future.

~ Fatih Birol, the IEA's chief economist, "Energy Watchdog Warns Of Oil-Production Crunch" (front page), WSJ, May 22, 2008

U.S. Geological Survey geologist on peak oil (1919)

The peak of [American oil] production will soon be passed – possibly within three years.

~ David White, Chief Geologist for the U.S. Geological Survey, 1919

Lord Browne on range-bound oil prices (2006)

But [it] is very likely that oil prices will range in the medium term around an average of $40.... In the long run it could even be $25 to $30.

~ Lord Browne, CEO, BP, June 12, 2006

(Oil prices averaged $70-plus a barrel in 2007.)

Time: "The beginning of the end of the oil era may be upon us"

Among the peakists, war and economic breakdown are favorite themes. They figure that cheap oil is the essential fuel of modern capitalism, which will founder without it. A more hopeful take is that innovation is the essential fuel of modern capitalism and that high oil prices will drive rapid advances in conservation and alternative energy. Either way, the beginning of the end of the oil era may be upon us, well ahead of schedule.

~ Time, "Peak Possibilities," November 21, 2007, by Justin Fox