Saturday, August 20, 2005

OPEC Reserves

John Mauldin writes a free weekly newsletter in which he shares his thoughts on the markets and economic data. While he's not a free-market economist, I find that he does a great job in surveying the literature and presenting arguments from various viewpoints. I'm currently behind in my readings, but hope to catch up and will post interesting snippets as I do. Here's the first one that caught my attention:
As an aside, and for something else to add to your worry closet, my friend and expert natural resource analyst and economist, Don Coxe recently wrote about a fascinating report by the Association for the Study of Peak Oil and Gas, which refers to 1985 when OPEC members were "competing with each other to be allotted bigger OPEC quotas." Coxe writes "OPEC has always allotted quotas to members in proportion to their proven reserves. Kuwait's geologists must have had a pretty good year, because their reserves climbed from 64 bn bbls to 92 bn. But the Kuwaitis were pikers compared to their brethren in the Emirates, who said that, upon reflection, they needed to boost their reserves from 31 bn to 92 bn. Not to be outdone, Iran announced its real reserves were 93 bn, up just a tad from a previous 47 bn. The 1985 champ, though, was the savvy Saddam, who was not content with double digits: his reserves went to 100 bn, up slightly from the previous 47 bn." According to the Association for the Study of Peak Oil and Gas, those reserve figures remain today.

There are serious reasons to doubt the truth of OPEC oil reserves, or there ability to increase production fast enough to keep up with projected world demand. Oil prices may not be dropping back into the 30's or low 40's again, without a sharp worldwide recession lowering demand big-time.

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