Energy Prices and Government Contracts

Trend: When the governments of oil-producing countries take most of the profits from joint projects, oil companies seek profits elsewhere, including alternative energy sources.

Christian at InvestorGeeks offers insight into the price of oil as big oil companies wrestle oil-producing countries for profits from the oil fields. Excerpts below.

Link: Thoughts on the Price of Oil and Gas on InvestorGeeks

Have you noticed that recently many oil and gas governments are revoking the contracts made with the oil nationals? You only have to do a Google news search with the terms "Bolivia, Ecuador, Venezuela, or Russia oil, and contract" and you will find oodles and oodles of articles.

The oil companies are on the short end of the stick and thus have nothing to say regarding their contracts. But I think the oil companies are fighting back in ways that are extremely sly, or at least I think are extremely sly.

...The oil multi’s spent billions and billions of dollars on fields that were taken away from them. I am sure this is getting the goat of the oil companies and they are not happy.

Here is what I think the oil companies and investors are doing.

• Playing a waiting game, where they drop the oil and gas price to levels that makes it very difficult for the governments to be fiscally responsible. Fiscal irresponsibility will result with lower prices, resulting in coup’s and losses at elections. Without being able to prove it I am guessing the oil people are waiting for the next "regime."
• Playing the alternative fuel card. Alternative fuel will not be used to replace oil and gas, but provide a vent when things get to hot with the price of oil and gas. A sort of counter measure to keep everybody "honest" when creating or breaking contracts.

...bio-diesel is profitable in the 50 USD dollar range, which interestingly enough is the price range that makes it difficult for many of the socialist leaders to keep their promises.

So here is my theory:

• Oil is going to stay in a trading range of the 50’s with a low of 45, and high of 65.
• If the oil or gas price gets too hot the alternative fuels are going to force the price down.
• Alternative fuels will slowly creep into the mainstream