The reason adjusting for inflation is important is because the cost of drilling, producing and shipping oil has moved with inflation too.
That said the cost of finding and producing a barrel of oil when adjusted for inflation is about the same since at least 1972.
Since it is a non renuable resourse there is less of it so it should be harder to find. This is counter acted by a range of technology that has found additional oil at the same cost.
There has always been about 7 years supply of oil in the last 30 years and every year many non oil people predict peak oil is this year or next year. Some have made the same prediction for decades in a row without feeling foolish. I fully expect them to tell me next year there is only 7 years left and we are at peak oil in 2011-2012.
The cheapest new drop of oil will come to market. Until that drop of oil comes to market at a much higher price than the 1970s oil spikes the world will rely on oil.
As a geoscientist it is easy to measure and state that the amount of carbon based fossil fuels in the earth is hundreds possibly thousands of times the amount historically extracted. The joined question is, at what price, and with what technology can it profitably be extracted?
Of course the short term SP of an oil stock will hinge on the current oil price and even more importantly the markets perception of future oil prices but geoscientist are much simpler creatures. Keep finding the largest body of oil that flows at you the fastest, and the rest of your business will take care of itself. Companies that do this grow and prosper, companies that do not go broke early or live like zombies off the discoveries of the past until they wither and are no more.
ITC Price at posting:
4.8¢ Sentiment: None Disclosure: Held
