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Monday, April 25, 2005

Peak Oil and Exploding Gold Prices

Eric Hommelberg of golddrivers.com has published a report on gold and Peak Oil.



The report suggests that based on the historical Gold price to Oil Price ratio we should have a current gold price exceeding $800 US per ounce. The report highlights previous oil shocks and their consequences because the era of cheap Oil will only be found in History books from now on the reports says.

The report says that according to many industry experts such as Matthew Simmons, Colin Campbell and Kenneth Deffeyes that we're approaching PEAK OIL at an alarmingly high speed. PEAK OIL is probaly here right now but unfortunately we've to wait a few years in order to confirm. This report says that PEAK OIL will bring about a nasty Oil shock in coming years.

The highlights of the report are:

-Oil discoveries have peeked 40 years ago.
- According to M King Hubbert Production peaks follow Discovery peaks after approximately 40 years.
- US Oil production already peaked in 1970.
- Non OPEC Oil production already peaked in the early 90’s.
- World Oil production will peak when OPEC peaks
- OPEC peaks when Saudi Arabia peaks
- Saudi Arabia peaks when Ghawar peaks
- Ghawar is aging rapidly and its life expectancy isn’t rosy. Matthew Simmons says that the end is in sight.

"Ghawar is one of the oldest Oil fields in production and lots of water injection is needed in order to keep production going. At one moment more water injection won’t be able to keep production going and Oil production will fall off a cliff meaning the Oil field dies." says Matthem Simmons. Read Matthew Simmons report here : Saudi Arabian Oil – A Glass Half Full Or Half Empty

- Prof. Kenneth Deffeyes predicts PEAK OIL to happen in 2005
- Bank of Montreal says that Gharwar is in already in decline.
- World Oil peak production means the End of Cheap Oil
- The End of Cheap Oil means continuing rising Oil prices which translates itself into Oil shocks.
- French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.
- Previous Oil shocks were an perfect call for recession/Inflation
- Gold is the ultimate Hedge against Inflation
- Rising Oil prices brings the historical Gold Price to Oil Price average way out of balance
- Historical average of the Gold Price to Oil Price ratio suggest a price of Gold exceeding $800 today.

You can read the full report at golddrivers.com

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