Where the Price Of Oil will move in the next two years is anybody's guess.

Factors like an impending global economic collapse due to Europe's problems could put very significant downward pressure on oil (I think to the $55 to $65 per barrel range - and by the way, I obviously think that Europe's problems are far from over, rather that they have barely begun).

Factors like increasing production out of Iraq can also put downward pressure on the price:

http://money.cnn.com/2011/10/28/news/international/iraq_oil/index.htm?iid=Popular

But against those two possible factors, there are other drivers. Continued erosion of production capability (ie. peak oil) in many other countries around the world, offset against general gradual demand increases as the world grows, will continue to exert upward pressure.

In addition, the Saudi's themselves will act to support a floor. Rumour has it that the Kingdom needs $92/barrel at the present time to support current and future development. They can work to influence the POO upward by shutting their taps off, partly.

In the midst of this, Connacher needs to see a minimum future price on bitumen (which is fairly strongly correlated with oil) at some level not yet agreed upon by Rebels and Jurek. I believe the numbers ranged from $35 per barrel for long-term sustainability to around $75. I understand very well the relationships between fixed and variable costs, and fluctuating royalty regimes, and discretionary costs, and which values should be assigned to operating expenses as per GAAP, and when GAAP can be subverted to come up with a variety of "conclusive" numbers. But in the midst of all this uncertainty, my feeling is that Connacher's required break-even point probably trends towards the upper end of that spectrum, ie. WTI in perhaps the $55 to $70 range. And I am sometimes concerned that my "breakeven range" is skewed too low because of Connacher's chronic underperformance on production levels compared to their initial goals.

I'm not really suggesting anything or asking any questions here. I was just thinking about where the price of oil might go in the next year or so, and thinking about the utility of hedging programs while oil is currently strong (in case Europe DOES actually fall to pieces). I just decided to do some thinking out loud here.