ExxonMobil, like many other companies, will do whatever is legal to benefit its directors, managers, and shareholders. Ethics and morality should play a bigger role.

ExxonMobil(XOM) sponsoring so called independent scientists to refute global warming is no different than sponsoring CERA to produce reports stating that peak oil is decades away.

If my chart below showing forecast supply, demand and price is true, then XOM will use all legal tactics to slow down the rate of nationalisation of oil assets. XOM must be seriously concerned about losing upstream oil assets and transforming into an oil service company such as Schlumberger or Halliburton.

Some of the key points of the forecast:

For 2007, the oil price stays above $US55 and could reach $US80 by Dec2007.

An unfavourable gap between forecast demand and supply starts in Oct2007 which could cause significant economic pain. If this forecast gap is true, it would be of great concern to XOM.

The oil price continues to show seasonal volatility and reaches almost $US110 by Dec2010. Price volatility could increase due to unpredictable events such as hurricanes, terrorism attacks, Middle East conflicts, unusually cold/warm weather and unexpected high production decline rates. For example, Saudi Arabia oil production might show an unexpected decline or the US/Israel could take military action against Iran.

Given the large number of assumptions, OPEC intervention and speculators, the above forecast has very high uncertainty.

Forecast assumptions:

World total liquids supply declines at -0.8%/year and demand increases at 1.7%/year. The decline is estimated from scenario 1 of my guest post on the oil drum http://www.theoildrum.com/story/2006/12/11/231813/91

The demand growth comes mainly from China, Other Asia and Middle East while growth rates from OECD vary from 0.1% to 1.0%. These growth figures are based partly on the IEA monthly market reports. http://omrpublic.iea.org/archiveresults.asp?formsection=tables&formdate=... Liquids include crude oil, lease condensate, NGLs and processing gains. Although forecast demand is greater than supply, the gap is closed by increased price because ultimately demand must be approximately equal to supply.

Mild northern hemisphere winter weather is assumed to continue and the price forecast from Jan2007 to Jun2007 is assumed to be a simple linear regression forecast based on the oil price (SDR) historic trend from Jan2002 to Dec2006.

Price elasticity of oil demand is assumed to increase from 0.10 in Jul2007 to 0.52 in Dec2010. The elasticity is assumed to be the same for increasing and decreasing prices. Elasticities are assumed to constant for all countries. For an interesting paper on elasticities –
http://cta.ornl.gov/cta/Publications/Reports/ORNL_TM2005_45.pdf

The oil price is forecast is SDRs (Special Drawing Rights) which simulate a global currency. The USD has devalued significantly against the Euro during the last few years and oil price increases measured in the USD gives a distorted view. It is assumed that the USD:SDR exchange rate remains constant at 1.50 from Jan2007 to Dec2010. The SDR is explained in http://www.imf.org/external/np/fin/data/param_rms_mth.aspx

The time dimension unit of a month was selected because supply figures are given monthly. Demand data is quarterly and is assumed to be the same for each month in the quarter. Prices are assumed to be month end and are from http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm
“All Countries Spot Price FOB Weighted by Estimated Export Volume (Dollars per Barrel)”