The price of oil has undergone a major and irreversible level shift since 2000. Demand growth from emerging economies has provided the assurance of a “bid” for the marginal barrel of oil supply, which has elevated the floor of the oil price. Supply side constraints on the upstream side currently dominate the mid range and ceiling price. Supply side issues can be divided between “Above Ground” and “Below Ground”, and both favor a continued high oil price. Above Ground refers to political factors such as oil price targeting by producers, and geopolitical risk factors. Below Ground refers to cost and complexity of finding new oil to replace depletion.
OPEC members and other oil exporting states nowadays are successfully targeting the price of oil by managing supply. Providing further credence to this notion, Saudi Arabia has openly indicated its price target of $100/bbl. This makes crude oil refined products the highest value hydrocarbons, and thus, provides the necessary financial incentive for CRH Corp. to pioneer and produce synthetic liquid fuel and petrochemical products via its Chemically Renewable Hydrocarbon (CRH) processes, by regenerating CO2 back to hydrocarbons.
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