An Oil Drought of Choice

Why has oil production been so slow to respond to higher prices? Since 2003 prices are up 3 ½ times. We’d expect companies to look for oil everywhere. The returns would be there. So what gives?

First, the oil companies have been pretty pessimistic when it comes to prices. Many of them have forecast future crude prices of around $60 / barrel. That would imply pump prices of less than $3. We wish. But if you’re paying a $100 million for an offshore rig, you need to be careful with your planning.

Second, governments often look at the oil companies as piggy banks that they can smash and withdraw cash from at will. From presidential candidates proposing windfall profit taxes to Canadian provinces raising lease payments, the political risks of the energy business have increased dramatically.

Conservative corporations and greedy politicians have slowed the oil supply response. Now we’re all paying for it. Supplies will go up. We just don’t know how soon.

Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!

Follow me on Twitter @GlobalMarketUpd

direct: 603-252-6509
reception: 603-224-1350 •
By |2014-09-03T18:22:07+00:00April 22nd, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

Leave A Comment