Ever since the advent of the Industrial Age the demand for oil has been increasing but despite this fuel and other oil-based products were relatively cheap and affordable. But like prices of other commodities the price of crude oil experiences wide price swings in times of shortage or over supply. The crude oil price cycle may extend over several years responding to changes in demand as well as OPEC and non-OPEC supply. Throughout much of the twentieth century, the price of U.S. petroleum was heavily regulated through production or price controls. In the post World War II era, U.S. oil prices at the wellhead averaged US$28.52 per barrel adjusted for inflation to 2010 dollars. In the absence of price controls, the U.S. price would have tracked the world price averaging near US$30.54. Over the same post war period, the median for the domestic and the adjusted world price of crude oil was US$20.53 in 2010 prices.  Adjusted for inflation, from 1947 to 2010 oil prices only exceeded US$20.53 per barrel 50 percent of the time.  Until March 28, 2000 when OPEC adopted the US$22-$28 price band for the OPEC basket of crude, real oil prices only exceeded US$30.00 per barrel in response to war or conflict in the Middle East.  With limited spare production capacity, OPEC abandoned its price band in 2005 and was powerless to stem a surge in oil prices, which was reminiscent of the late 1970s.
The very long-term view is similar. Since 1869, US crude oil prices adjusted for inflation averaged US$23.67 per barrel in 2010 dollars compared to US$24.58 for world oil prices.
Fifty percent of the time prices-U.S and world prices were below the median oil price of US$24.58 per barrel.
If long-term history is a guide, those in the upstream segment of the crude oil industry should structure their businesses to be able to operate with a profit, below US$24.58 per barrel half of the time.  The very long-term data and the post World War II data suggest a “normal” price far below the current price.  However, the rise of OPEC, which replaced the Texas Railroad Commission as the monitor of spare production capacity, together with increased interest in oil futures, as an asset class, introduced changes that support prices far higher than the historical “norm.”
The results are dramatically different if only post-1970 data are used. In that case, U.S. crude oil had an average price of US$34.77 per barrel. The more relevant world oil price averaged US$37.93 per barrel. The median oil price for that period is US$32.50 per barrel.
If oil prices revert to the mean this period is a little more appropriate for today’s analyst. It follows the peak in U.S. oil production eliminating the effects of the Texas Railroad Commission, which effectively controlled oil prices prior to 1970. It is a period when the Seven Sisters were no longer able to dominate oil production and prices and an era of greater influence for OPEC oil producers. As we will see in the detail below, influence over the price of oil is not equivalent to control.
Prices in the mid US$30s seem exceptionally low by today’s standards. However, when the current President of the United States took office the price was US$35.00 per barrel. By the end of 2009 prices had doubled bringing the average for 2009 to US$56.35 or US$57.00 in 2010.
The price upswings of oil have had and are having severe adverse impact on countries that are importers of oil and oil-based products, particularly developing countries, as huge chunks of their scarce foreign currency earnings are used to pay for fuel. Those countries that generate electricity through the use of fossil fuels are even harder hit. Our country is a typical example.
In this context, the announcement by Canadian Oil and Gas Exploration Company, CGX Energy Inc. that a semi-submersible drilling rig departed the Gulf of Mexico on New Year’s Day for Guyana, and is expected to be here by month- end to commence drilling for oil in its Eagle-1 off-shore well, is most exciting as most Guyanese would be anxious on the results of its outcome. In fact, it could be the exploratory project that could determine whether we join the elite band of oil producing economies.
We have to now wait and keep our fingers crossed and hope that the results are positive and according to the technical data we have reasons to be optimistic, but it is yet too soon to say we have struck “ black gold.”
Nevertheless, an independent report from Gustavson Associates showed CGX held a resource estimate of 2.8 billion barrels on three prospects on the Corentyne concession.
The United States Geological Survey (USGS) had, in 2000, concluded that the Guyana-Suriname sedimentary basin contains 15 billion barrels of undiscovered oil.
Local sources have, however, cautioned that regardless what the USGS says, no one will know for sure whether there is oil until drilling starts.
The company also intends to drill the Jaguar-1 well, in which it has a 25% interest with partners Repsol Exploracion S.A (operator), YPF Guyana Limited and Tullow Guyana B.V.
The Jaguar-1 well, located on the Georgetown petroleum prospecting licence, will appraise the Turonian geologic formation and will be drilled to an anticipated depth of 6,500 metres by the Atwood Beacon jackup rig as soon as it completes drilling for Inpex Corporation offshore Suriname.