4.2. Oil price structure. World oil market long-term prospects.

The traditional understanding of oil price structure assumes allocation of three main elements:

• costs on investigation and production;

• taxes;

• profit.

Prior to the beginning of 2000th years the similar structure of pricing has not caused as a whole doubts though it was clear that the price formed in the future market inevitably contains speculative component.

Destabilization of situation in oil-producing countries of Persian gulf, Venezuela, Nigeria, threat of terrorism acts caused new "geopolitical factor" of oil pricing. As a rule, within the limits of a price range up to 30 dollars "geopolitics "and" speculative "factors were not divided. The reasons analysis of oil price increase above 40 dollars requires closer and an individual approach. It is possible to suggest the following structure of the price and its approximate values of separate component (within the limits of oil price value 50 dollars/barrel).

Costs of exploration and an oil recovery

Within the limits of this price component there are significant fluctuations - from 1,5-4 doll./barrel.. of total production costs in Near-Eastern to 10-15 dollars/barrel of cost in Canada, Eastern Siberia, northern shelves. This forecast has maximal value of all costs on exploration, development and operation of oil field in view of the high oil modern prices. Chosen value of costs reflects rather the future growth of expenses.

Taxes, royalty, profit.

The value of this price component also considerably is differed depending on geography of oil production. Its average value is chosen so that a total sum of all production and other costs combined with taxes, royalty, profit does not exceed 15 dollars/barrel. Strictly speaking, this value is absolutely minimal «a threshold of profitability "for the oil companies now.

The geopolitics factor

This component is estimated in 4-10 dollars/barrel by separate experts.

Weakness of the American dollar

Economists traditionally specify the important role of this factor. From the point of view of the Nobel prize winner on economy, Professor Robert Mundell, - it is necessary to separate the following in the price of any raw goods: first, cost of the goods, and, secondly, in what currency its cost is expressed. As factors causing "rise-fall" of the prices for the raw goods and the basic world currencies do not coincide so, as a rule, the level of the price and "force" of currency are in opposition. It also is marked today in the oil market.

The speculative factor

Presence of this factor follows from fundamental bases of the future markets. However speculative making price before 2002 could be neglected. Today already practically nobody doubts of the speculative nature of the future prices.

Low interest rates

The main role of low interest rates as basic macroeconomic stimulus of oil demand growth became obvious only recently. Probably the department of energy of the USA and Federal Reserve System of the U.S.A. agree and support ideological principle about priority of oil high prices and about very importance of the fastest input of transport system on alternative energy. This assumption is based on actions of Federal Reserve System of the U.S.A that sharp decreased interest rates from level in 6,5 % down to 1 % starting December, 2000. This caused essential increase in monetary weight all over the world and accordingly to growth of raw material resources demand and, first of all, of oil. The low interest rates could be the basic pricing component of crude oil during 2001-2004.

The script of the future possible collapse of oil futures market when the prices for oil would fall from 50 dollars/barrel to 20-25 dollars/barrel is not analyzed in details by oil analytical experts. Mainly this script is discussed and supported by financial analysts who already were witnesses of many global and regional financial crises. The steady assurance the majority of experts-oilmen to idea of further oil price rise is supported by comprehension of the future peak of world oil recovery in 2006-2008.

Problem situations in all main oil production regions make obviously problematic significant growth from current level of world recovery in 80 million barrels/day up to 120 million barrels/day in 2020. So it is logically to assume a rise of oil prices in the future.

Practically all analysts of oil market agree that today's high prices are mostly defined by speculative not of fundamental factors. And nevertheless, speaking about the future perspective, many of them believe the prices rise will continuously proceed further as result of the further demand increase.