PESGB June 2004
President’s Page- Steve Boldy
Well here we are with oil prices back above $40 a barrel. It has a lovely ring to it, $40 In dollars a barrel, well worth repeating, From what I remember, apart from a short blip during 0 the first Gulf War, the oil price hasn’t been above $40 since the halcyon days of 198 1, (“) Of course the big question is ‘Where does it go from here?’ The reports I’ve seen suggest the days of cheap oil are over and the next target to watch out for is the $50 barrier. But I seem to remember hearing all this before, I also remember that it wasn’t very long ago (1999) that the perceived wisdom was that oil prices would remain at or below $15 a barrel for the foreseeable future; ‘Cheap Oil the New Paradigm’ or some such trendy phraseology.
So, history indicates that we should be very cautious about believing the latest aggressive price forecasts. However, it is interesting to look back at the impact the ‘Low oil price ‘ scenario had upon the industry – leading to the boom in M&A activity and widespread consolidation with the disappearance of many household names – Mobil, Amoco, Arco, Elf, Fina to name but a few of the largest.
The acquirers of companies and assets in this process must be fee ling pretty chuffed with themselves , but what of the sellers? It is interesting to speculate what the price forecasts being used by the sellers were and how much this perception drove the merger activity.
That is however, all water under the bridge and I think we should just enjoy $40 oil while it lasts and if the price does get to $50, perhaps we should have a big PESGB bash, perhaps sponsored by the acquirers of low cost assets?