Skyrocketing Oil Prices

Robert Hsu, May 23, 2008

Oil costs are still rocketing to the sky. As I have predicted several times, crude oil prices are continuing their march upward and are showing no signs of stopping. Oil is sitting at a record $135 a barrel, and Investment bank Goldman Sachs recently raised its oil price forecast to $141 a barrel. While supplies are already tight, there is speculation that Chinese diesel purchases related to earthquake reconstruction efforts will further strain supplies and push up prices.

In response to the higher energy prices and oil crunch, the Energy Department announced last Friday that it would stop sending oil to the U.S. Strategic Petroleum Reserve for the next six months. The decision was made only three days after Congress passed a bill allowing this to happen, in the hopes of lowering gas prices at the pump.

Also hoping to alleviate the gas crunch was President Bush, who visited Saudi Arabia last week to coax the Saudis to increase crude oil production. As a result of the talks, the Saudis agreed to increase its crude oil production another 300,000 extra barrels per day, or about 3% above current levels. However, I don't think that this will have much of an impact on oil supplies because I think that Saudi Arabia is already trying to produce as much oil as it can. Strong demand for energy from fast-growing economies like China and India only make it more difficult for producers to keep up, and because of this, Saudi Arabia's six major oil fields have all matured past their peak.

This is why it is no longer useful to lean on the Saudis to produce more oil. Instead, the best hope for more oil is new underwater findings such as the ones that were recently discovered by our own offshore oil drilling company. To learn more about this top company that is benefiting from the oil boom, become an Asia Edge member today!

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