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In an interesting article by MSN Money columnist Jim Jublak, it appears that the next spike in oil prices will come in 2008 (oddly enough, the next election year) and won’t be brought on by OPEC or the Middle East, but by Russia.
Essentially, Jublak states that the recent decline in oil and gasoline prices has been due to an imbalance between supply and demand, thanks to too much supply and not enough demand. This, of course, is manifested in the fact that in the face of record high oil and gasoline prices, world wide inventories increased. However, Jublak goes on to state that this balance between supply and demand has always walked a very thin line and even a slight tilt back towards too much demand and not enough supply could push oil and gas prices back up into the upper $70s and into the $80s.
Now this is where the Russians come in.
Over the past several years, many of the world’s untapped oil fields have been discovered throughout Russia. In turn, Russia has given almost all of the controlling stakes in these fields to state owned oil companies. Additionally, Russia has been trying to force Western oil companies to give up or sell their stakes in older or currently productive oil fields in order to turn these fields over to Russian owned oil companies.
Currently, Russia is responsible for nearly 15% of the world’s oil output. However, if new, deep oil fields continue to be discovered, Russia may ultimately control over 20% of the world’s oil. And with a vast majority of it being controlled by state owned oil companies, it appears Russia is setting itself up to be a major player in future oil prices.
Whether or not Russia will yield this power to force oil prices upwards remains to be seen. However, Jublak argues that the mere fact that Russia might have that ability could be enough to “spook” the markets and drive oil prices beyond this summer’s record highs.
Who knows, maybe we’ll be headed into another Cold War.
Or, maybe it’s all just a bunch of hype – much like everything that went into this summer’s record high prices.
