1. OPEC member states control more than 50% of supply
2. Russia is actually the largest producer, but it consumes more than Saudi Arabia so it exports less
3. Iraq has the largest 2nd largest oil reserves after Saudi Arabia
4. There is considerable controversy over whether Arab oil reserves are really as large as stated since OPEC discloses very little.
5. Among the fastest growing users of oils are countries like China and India which actually subsidise supplies. I understand that China recently reduces subsidies causing oil prices to rise 10%(?), but this is still far from market pricing
6. Some prospective oil provinces are locked up, preventing oil exploration, eg. Alaska
When I made my forecast of oil I was using a very simple financial model to determine its price outlook. At this point, I want to perform some more detailed analysis. I will offer some advice about where I think the world is going:
1. China and India will be forced to reduce their subsidies, though the slow pace at which they do it will push oil prices higher. The cost to the country is likely to be the compelling reason for lowering them.
It goes without saying that oil prices are going a lot higher and that the government will want a piece of the price action. There is no question that the price incentives are already there for oil exploration, so I think the US and other governments will take the opportunity to carve a share out of the oil pie. The proceeds will in many countries be used for nuclear, solar, wind, geothermal (hot rocks), fuel cells, battery (load shaving) power schemes, energy saving subsidies /initiatives, and electric train-based transport systems.
More on my oil price forecast later.
Andrew Sheldon www.sheldonthinks.com