Published: October 23 2008 19:37 | Last updated: October 23 2008 19:37
The slide in world oil prices from Julys record high of $147 a barrel to less than $70 has been even more dramatic than their earlier rise. When the Opec oil cartel meets on Friday to discuss an emergency cut in output, its decision may do little to reverse that fall. A looming recession in the US and parts of Europe has knocked the widely held belief that the world is heading for a supply crunch. Temporary over-capacity is a more credible scenario.
It is hard to see the cartel not cutting production. Official US data show crude stocks rising faster than expected, evidence that consumers are reducing their energy use. The price of benchmark US crude could easily fall to $60 before stabilising.
Even the prospect of a large cut in output is priced into the markets. Analysts believe Opec would have to slash production by more than 1m barrels a day, and maintain a discipline it has repeatedly failed to show in the past, to avoid further price slides. There are hints that Saudi Arabia, Opecs biggest producer and a moderating influence on its hawkish members, would like to see a smaller cut than that.
For central banks, the steep fall in oil prices is one piece of welcome news. Upward pressure on inflation should subside, allowing them to continue cutting interest rates an essential step if the world is to avoid a deep, prolonged recession.
If sustained, the lower price level will have further repercussions. Big producers such as Russia and Venezuela will struggle to exert political influence through energy policy. Resource nationalism, where oil-rich governments impose tougher terms on independent companies and notably in the case of Shell in Russia force them to cede control of assets, may soon be a spent force.
National oil companies whose revenues finance their governments spending will find investment in new fields less affordable. They could end up turning back to the expertise of the independent majors to tap hard-to-access reserves. Western companies that need prices just shy of $90 to develop Canadian oil sands may have to rethink, too.
Even if new projects are delayed or abandoned, reduced levels of capital expenditure are unlikely to support oil prices. Enough crude is forecast to come onstream to keep the world adequately supplied over the next three to five years. Despite resilient Asian demand, world consumption may not grow at all in 2009. Overcapacity can be expected to weigh on the market. The question is what happens when the world gets back on its feet. Right now, that looks a distant prospect.
Copyright The Financial Times Limited 2008
This website and sisters royaldutchshellplc.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.
Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
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A head-cut image of Alfred Donovan (now deceased) appears courtesy of The Wall Street Journal.
