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  • feets_dont_failme_now feets_dont_failme_now May 6, 2006 9:40 AM Flag

    Peak Oil

    "...Wouldn't you agree that a price of $70-75 per barrel indicates we don't have enough $60 per barrel oil? ..."

    No, not at all.

    Some of that price is political risk, Iran, Iraq, N. Korea, etc. This component could probably be quantified, but for the sake of argument would you be willing to stipulate to $5/BBL?

    Another component that is often overlooked is the devaluation of the dollar. In the last few years it's down about 30%. When the dollar falls oil prices rise.

    Finally, (and most important), energy companies are VERY conservative. The oil industry has a long history of boom and bust. Prices rise, more production comes on-stream and prices collapse. There is about a 5 year lag time.

    I do not subscribe to the peak oil theory. Rather, I see oil reaching a maximum economical production rate. As prices rise, oil production will too but at some point alternatives become economical. At that point, new production will be replaced by alternatives - not because new production is not possible, but because there is more profit in the alternatives.

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