A German company says it has developed an engineering installation capable of synthesizing petroleum-based fuels from water and carbon dioxide. The ‘power-to-liquid’ rig converts gases extracted from water into liquid hydrocarbon fuels. This is the opposite side of what happens with trying to use energy as a weapon. Raising the price or trying to curtail supply, forces others to find alternatives. A year-end closing for oil BELOW $75 in crude will have a very serious impact.
Russia gets most of its oil in difficult places. Its cost of production is around $65. Kazakhstan and Azerbaijan have much easier oil to extract and as such they fear that Russia may move in simply for the oil. The collapse in oil will have a very profound impact in the world economy. The top exporter is Saudi Arabia with Russia holding the second spot. Iran and Iraq come in 3rd and 4th. Declining oil prices renders all these governments economically in trouble. Their budgets have risen assuming higher oil prices forever, but when we forecast that oil would rise to $100 back when it was $10 in 1999, many assumed we were nuts and that the world could not handle such a price. That was necessary we warned to spark alternative fuels. Today we have electric cars.
Reprinted from Armstrong Economics.