Dubai Etf

We are on track to $ 200 oil. Are you ready?

Turn on CNN, Fox News, or CNBC, and you're all but guaranteed to see a group of "experts" who bet on cheap oil. They make a big mistake. Oil is now more than ever ready to rise to the price rocket to three digits - and investors who make smart paris now go make a fortune in the process.

The Americans got wrong about the oil crisis that we are really facing. Despite media contortions blame speculators on the futures market for oil prohibitively expensive, spot prices today are severely biased lower than they should be right now. Although it is quite true that speculation fueled prospect of $ 147 oil this summer, the pundits ignore the fact that the intrinsic price of oil is set to rise regardless of supply and demand.

The prices are not based on supply and demand ... What kind of market is this?

One reason oil pushes higher now that the cost of extracting and processing oil has increased in recent years. "Peak oil" is a frequently cited justification for the rising cost of oil extraction. Under the theory of peak oil, as we well pump, easy to find oil in the ground, we are left with low grade oil that is deeper in the ground and more difficult (and expensive) extracted.

But peak oil is more than a theory, it is a certainty.

Some experts believe that the petroleum oil may have peaked in 2005. If true, this means that time goes on the price of oil will continue to rise astronomically. However, evidence that global oil production has already peaked is anecdotal at best.

Production of oil in the world

The table above shows the production of oil in the world from 1960 to 2005. While production of crude oil reached new heights in 2005, we are in a similar place in the late 1970s when oil has seen a short-term "false peak" and then continued to climb. And for every expert who says that we have already reached peak oil production, there are two who say that we have reserves to last us for decades more.

But this does not change the fact that the cost of oil is rising rapidly for the producers. Could it be a case of poor budgeting?

Currently, a handful of nations in the Middle East are in a serious situation. Despite access to one of the most valuable assets in the world, places like Saudi Arabia, Dubai, Qatar and Oman are at serious risk of large budget deficit for 2009. For some, like Saudi Arabia, it would be the first deficit posted nearly a decade ... For others, like Qatar, it would be the first budget deficit in history. With margins lower oil than ever, they are spending themselves to death. And cost overruns is not relegated to the oil producing countries. Oil companies are producing the pain felt good at the moment.

Over the last nine months, the oil giant Exxon Mobil (NYSE: XOM) saw its profits drop 73% to $ 0.92 per share. It is a colossal collapse for a few months before that company announced the largest annual profit of a company in the history of the United States.

Before the oil boom took off, the average operating cost for a barrel of oil was $ 38, but in recent years the price of the bottom line of breaking even for a barrel of oil has averaged $ 87.24 - which means that for companies like Exxon and Chevron to report a profit from their oil production divisions, they need to see oil prices 22% higher than they are today ' hui.

But it gets worse ...

Between 2002 and 2008, oil prices have risen steadily - at a rate of nearly 18% annually. With forecast $ 100 oil in the late 2000s (as we saw last year), oil companies and producing countries have increased their bonds, b.