Higher Cost of Extracting Oil to Support Prices; Special Report by Leading Financial Site Penny Stock Detectives

Danny Esposito points out how slower growth means that consumers will drive less and thus consume less oil, putting pressure on oil prices.

New York, NY (prHWY.com) June 29, 2012 - In a recent Penny Stock Detectives article, editor Danny Esposito points out how slower growth means that consumers will drive less and thus consume less oil, putting pressure on oil prices. Esposito believes that there will be a floor under oil prices because the cost of extracting new sources of oil has gone up exponentially.

"The Asian economies are experiencing an economic slowdown," notes Esposito. "The U.S. is unable to pick up any speed in terms of economic growth, while Europe continues to wallow in a recession."

According to the editor, the other political factor consists of the continued tensions with Iran. While talks continue, the sanctions on Iran remain. Because less oil supply is being brought to the market due to the sanctions against Iran, Saudi Arabia, at the request of the U.S., is providing more oil to the market to ensure oil prices don't rocket higher.

As countries like India and China are circumventing the sanctions and buying Iranian oil anyway, says Esposito, there is more oil supply on the market than demand, thanks to Saudi Arabia, which is putting downward pressure on oil prices.

Esposito believes this is a temporary situation, but trying to determine how the political landscape will play itself out is extremely difficult.

The largest influence on oil prices going forward, however, is the cost of exploring and extracting oil, according to Esposito.

"The supply of cheap oil, which costs exploring companies $15.00 a barrel, reached a plateau sometime in 2004. Since then, demand for oil increased, while the supply of cheap oil remained constant, which would have sent oil prices much higher were it not for companies exploring for oil in unconventional places," says Esposito.

According to the editor, deepwater exploring for oil, the tar sands deposits, and alternative energies like biofuel have replaced the depleting mature oil fields, preventing oil prices from reaching ridiculously high levels.

"With oil prices moving higher since 2004, it has been profitable for exploring companies to take heavy oil, extract the impurities from it, and sell it in the marketplace," Esposito points out.

The editor says that the major oil companies agree that the days of cheap oil costing $15.00 a barrel to explore for and extract are pretty much over. The alternatives such as deepwater drilling, tar sands deposits and heavy oil are more expensive to get to market. They don't cost $15.00 a barrel to extract, says Esposito; the cost estimates range anywhere from $40.00 to $90.00 a barrel.

The experts in the field tend to narrow that range from $65.00 to $90.00 a barrel, according to the editor. This means that, should oil prices fall further, the exploring companies finding that oil prices aren't covering the cost of extracting the oil will simply shut down their production of expensive oil, believes Esposito.

"When production shuts down, supply to the market will fall, causing oil prices to rise once more," Esposito warns.

Esposito believes investors should be aware of this new dynamic in the marketplace and take advantage of the market with the future wild swings of oil prices.

To see the full article and to learn more about Penny Stock Detectives, visit www.pennystockdetectives.com.

The editors of Penny Stock Detectives believe low-priced stocks, when researched properly, present investors with great opportunities to accumulate wealth and to increase the value of their investment portfolios. You can learn more about Penny Stock Detectives at www.pennystockdetectives.com.

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Tag Words: oil prices, exploring, penny stock detectives

Categories: Finance

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