Alan Greenspan gave a speech today on oil, suggesting that the market will work things out and the politicians ought to sit this one out.
- Since his last speech on oil in October, prices are sticking higher.
- Believes that although in the short term demand may not fall off, if prices stick higher over the longer term, demand will fall and production will be encouraged to rise.
- Noted how important oil is to the U.S. economy and suspects businesses are now starting to make decisions based on higher oil prices. Suggests what happens visa-a-via the 200 million U.S. passenger vehicles is also important as they consume 11% of global oil production.
- In terms of reserves and production, he believes reserves are adequate but more and more concentrated in areas of geopolitical uncertainty. Should that uncertainty decline, it would be a positive. He believes that enhanced recovery techniques will help maintaining production, though notes discovery is down. He believes substantial investment is needed in production and refinery facilities, but since many of the producers are blocking private investment, this is an issue of some consequence.
- Goes into detail on natural gas, where the price has been elevated for a while as US production has not kept up. Believes the market will rectify this situation via the import of LNG. (High profit margins attract more profit seeking businesses, creates more competition, drives down prices, yada yada.)
- Mentions methane hydrates as possible future energy source, and the promise of GTL (gas to liquid). Generally, he has faith that the market will find a solution, one way or another.
Read all about it here, or read the news version here.