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Oil Price Hike: Here We Go Again!

Speculation on the uncertainty in the Middle East has once again fueled oil prices to their highest levels since 2008. While Libya only contributes 2 percent to the global crude oil production, it is a major regional player. Libya is Africa's third-largest crude producer and has the largest oil reserves in Africa, approximately 44 billion barrels. The world consumes 87.5 million barrels of oil per day.

Crude oil prices are hovering around US$95 a barrel on the New York Mercantile Exchange. Brent crude hit $106 per barrel on the ICE Futures Exchange. As these price increases work through the supply chain we expect to see gasoline prices continue to rise. World economies continue to gain momentum, and energy consumption is expected to increase. Don’t be surprised if gasoline hits $4 per gallon in the US this summer. As long as the price of crude oil does not reach $150 a barrel, {complink 7526|Semico Research Corp.} believes the economic recovery will continue.

As for semiconductors, higher energy prices are always a concern as products have to be moved around the world from production to assembly to store shelves. Semico’s IPI index has been declining since midyear 2010, raising our worries about the strength of the semiconductor market in the second half of 2011.

There continues to be much excitement around new entries into the tablet market, Android-based cellphones, and increased capabilities of the wireless network with 4G deployment. We continue to be cautiously optimistic that the semiconductor market will show 8 percent growth in 2011 and expect 2012 to be the year when the semiconductor industry actually sidesteps a major downturn and will experience a soft landing.

20 comments on “Oil Price Hike: Here We Go Again!

  1. mfbertozzi
    March 2, 2011

    Good analysis Jim, personally I think it reports to us the urgent matter to speed up any actions on green. A couple of thoughts:
    -thanks to smartph/tablets and so on mobile communications are ramping a lot; what mobile telecoms are doing in the electronic towards green?
    -could optical switching represent a right step as tentative to replace whose based on electronic switching?

  2. eemom
    March 2, 2011

    It is scary to think of oil prices reaching $150 per gallon, but good to know that economic recovery can still continue ar these levels. As discussed in previous blogs though, there are a lot more factors to consider in forecasting the year (s) ahead.

  3. Eldredge
    March 2, 2011

    I have my doubts that an economic recovery can withstand a sustained oil price near $150 per barrel. Hopefully, we won't have to find out.

  4. Mydesign
    March 3, 2011

       Jim, Middle East countries are rich in crude oil and they are contributing more than 2/3 of the world’s crude oil requirement. Economic turns over in these countries are majorly depended on crude oil and allied products. Due to the recent political instability in this region, the crude oil prices are gone to ever high in history of more than 116/ barallel and expected to be 150/barellel. So whenever the crude oil prices are going high, it’s have a corresponding impact in world economy too and we had realized it during the previous Kuwait-Iraq and Iraq-Iran war. This high price reduces the spending power and forced the countries to limit the import of crude oil, which in turn increase the transportation and other energy generation costs.

       In my personal opinion, we have to explore alternate energies such as solar, wind, sea-waves, waste etc to avoid such scenarios in future. We are still largely dependent on oil for our daily survival and it’s NOT safe, to rely these counties always for the oil requirements.  Moreover, it’s better to maintain an international pressure on these countries, to resolve their issues for a stable government.

  5. Anand
    March 3, 2011

    Jim Feldhan,

      Oil price rise is not only big concern for Semiconductor industry but to all the manufacturing industries which relies on transportation. Looking at the turmoil in middle east, oil might cross 150$ as well. How can manufacturing industry prepare for this challenge ? One solution I can think of is diversifying the manufacturing base to different regions so that transportation cost can be saved. Are there any other solutions to this problem ?

  6. mfbertozzi
    March 3, 2011

    Anandvy, your post is highlighting one of the most important point: which solutions are in place to solve up&down oil trend? Manufacturing delocation is a possible approach, but is it enough? It requires absolutly political stability in the regions involved. Maybe additional approaches could help more. Herein to mention for example:
    -speedup ecofuel engine not only for cars but for any industrial engine
    -speedup green architecture for IT industries
    Am I still far from right steps?

  7. Nemos
    March 3, 2011

     I agree with your post mfbertozzi , the Oil price hike problem we have seen it in the past and now we watch the same scenario. When the oil price goes up effects all the world and especially the food chain and the poor people. So we know the problem and even if you ask your little child he knows the answer.

    -GREEN ENERGY.

    and with this way not only we have a solution to the oil hike problem also we contribute to our ecosystem.

     

  8. Adeniji Kayode
    March 5, 2011

    The earlier we start to explore the alternative energies the better. Our dependency is so high on crude oil so much that when there is increase in price, all other commodities also increase in price and the impact is felt by everyone.   

  9. itguyphil
    March 6, 2011

    If large companies can monetize the green initiative, we will see changes made. Otherwise, oil is where the big bucks are for now.. so it remains unchanged.

  10. Nemos
    March 6, 2011

    Yes, but behind companies people like me and you take decisions , even if you have a small position in a company , you have a big rule to play in our society and in our world general. You can see it now, if you look in North Africa how much power poor people have and how  they can effect the global economy. What I am trying to say is that if the people change mentality they can force the large companies as you said to change their plans.

  11. itguyphil
    March 6, 2011

    Good point! The power is in the masses.

  12. Wale Bakare
    March 6, 2011

    I believe with intense research activities being undertaking on alternative & renewable energy as well as roadmap on smart grid technology. Dependency on oil will come down gradually even with the incessant crisis in major oil producing states. Meanwhile, it was also predicted that millions of Electric Vehicles will be on the roads in 2011. 

  13. Adeniji Kayode
    March 7, 2011

    Wale:

    you are right. The more electric vehicles we have on our roads are signs that our total dependency on oil will reduce soon.

  14. Clairvoyant
    March 7, 2011

    It is great to see the push on for electric vehicles. It has been a long time coming though, and I think it will remain to be a long time before we see any significant decrease in the world's need for oil. In the meantime we will continue to pay higher prices for all our products.

  15. Eldredge
    March 7, 2011

    Unfortunately, it is unlikely that the total of all the green technologies will be sufficient either in terms of the amount of energy produced, or in terms of economic feasilbility. We need to also be pursuing domestic oil and natural gas production, modern nuclear facilities, burning of waste products for energy, and clean coal facilities. Different regions of the country can benefit from the technology and resources that are available in that region.

  16. Wale Bakare
    March 7, 2011

     

     

     

     

    Technologies have now matured and mined to where soft/hardware & electrical/electronic revolutinary trend will soon catchup with automobile sector. Though, vehicle technology is being around for a while. We have seen hybrid vehicles power by both combustible oil engine and battery pack or bank of batteries for long.  Now, electric vehicles market flooding may not take long, this will at least calming down upsurge pump prices every now and then.Shall we say beginning of next year, even every auto manufacturer is bracing up for the evolution.

    Oil dominance in powering vehicles is very ephemeral.

     

     

     

     

     

     

  17. Mydesign
    March 9, 2011

       Whenever there is an oil price hike or something turns badly in Middle East countries, it’s observed that most of the peoples and industries are much talking and sharing their concerns about oil. Perhaps, in most of the time it becomes a hot topic for international discussion with the rest of world.

        In my personal opinion, we still didn’t learn any lessons from the past Iran-Iraq or Iraq-Kuwait war.  That’s why still we are depending up on the Middle East countries for most of our energy (oil) requirements. Why can’t we try to explore other sources of energy? Why most of our scientists and research engineers are NOT trying to find the application for alternate source of energy’s like solar, water oxygen, hydrogen etc. Why can’t we develop some engines which can take water, oxygen or hydrogen as fuel?

        Such innovations can make a rapid transaction in future like the innovation of electricity by Benjamin Franklin (1752) and electric motor by Faraday (1821).  But one thing is dam sure; there should be always a political instability in this region, due to different political reasons. So the rest of world should take care about their energy requirements and its all depends up on how they are going to address it.

  18. Eldredge
    March 9, 2011

    I totally agree (hard to dispute) that dependance on foreign oil supply is both economically and strategically problematic. And we absolutely do need to invest in research of new sources of energy producing technology. However, I think a risk analysis based on the current and projected levels of energy consumption would probably show that we place our energy supply line at great risk by depending solely on undiscovered or unproven technoogies in the short term, without also investing in known/proven sources as well. I have heard the statistic that 70% of our electricilty is still produced from fossil fuels. This statistic needs to move to domenstic sources of energy in order for electric cars to gain the most leverage against oil imports, otherwise it is at least in part just a shell game where the oil consumption moves from the auto to the electric plant. Production of hydrogen gas requires electricity as well. It would be interesting to see someone apply a risk analysis approach to energy supply and develop some comclusions on short term and long term recommendations for energy investment and research.

  19. Adeniji Kayode
    March 9, 2011

    It is really a good suggestion and step in a time like this to start exploring other sources of energies.

    it's not that our scientists and engineers are not aware of this or the implication of total dependency on Oil but the requirements for putting other sources of energies to work is too great when compared with Oil and that might also leads to handling more delicate and sophisticated gargets to be able to use this alternative energies.

  20. Mydesign
    March 17, 2011

        From seventy’s onwards, scientists are trying to consider hydrogen as a promising alternative for petrol because of its clean combustion nature. Unlike hydrocarbon based fuels (petrol), which spew green house gases and harmful pollutants, hydrogen’s only combustion by-product is water.  Compared to gasoline, hydrogen is lightweight and can provide a higher energy density and is readily available in atmosphere or can be generated manually. But any type of research had not happened in similar line because of certain reason like hydrogen storage technology, combustion method etc

       In recent years, researchers have attempted to address both this issues by locking hydrogen into solids, packing larger quantities into smaller volumes with low reactivity keeping this volatile gas stable. However, most of these solids can only absorb a small amount of hydrogen and require extreme heating or cooling to boost their efficiency.

       Now, scientists with the US Department of Energy have designed a new composite material for hydrogen storage consisting of nano particles of magnesium metal sprinkled through a matrix a polymer related to Plexiglas. This nano-composite rapidly absorbs and releases hydrogen at modest temperatures without oxidizing the metal after cycling, which is a major breakthrough in materials design for hydrogen storage, batteries and fuel cells.

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