Do the Recent Oil Discoveries Mean Lower Oil Prices in the near future?
The McMoRan oil discovery beneath 20 feet of water off Louisiana coast in January and the other such discoveries since, has generated lots of speculation as whether oil prices would be lowered in the future through high production of oil from these new oil reserves. Before we come to a conclusion on lower oil prices in the near future, here are a few things that would enable such a situation to become a reality.
The demand for oils and white diesel has not fallen. Presently the world has a serious need for oil and with a number of countries becoming more industrialized and expanding their commerce ability the need will likely increase greatly. Thus these new fields when they become operational will only be able to fill an already growing demand.
Cost of bring the new source to the market. Many oil companies will tell you that the cost associated with producing a barrel of oil from a new source is extremely high. What this means is that any new discovery of oil will not automatically lead to a reduction in oil prices when it hits the marketplace. There is likely to be a slight increase.
The development of alternative sources of energy. Although currently they make up a small portion of the energy source worldwide, alternative energy is still increasing in usage and popularity. This is simply because the technology that drives alternative energy sources is constantly improving. Depending how massive a step forward these sources make by the time new oil discoveries are brought to the market, the demand for oil may be reduced.
There are other factors that will affect the price of oil including economic stability. We all would expect falling oil prices with new oil reserves being found, but it is not as simple as it sounds. There are a number of reasons why this is so and it is important not to ignore them.