The First Good News About Oil In Years: Brazil Discovers Oil, Could Open Sovereign Fund

The prevailing wisdom is that oil prices will keep rising. One CIBC analyst recently said it will hit $200 by 2010, driving US gasoline prices to $7.

The Brazilians say they will rescue us from all of that. They claim to have found enough oil to power this hemisphere for ages. According to Bloomberg, Brazil has discovered huge deposits of crude. The news agency writes "Brazil’s discoveries of what may be two of the world’s three biggest oil finds in the past 30 years could help end the Western Hemisphere’s reliance on Middle East crude."

While the discoveries may not push oil prices back to $50 a barrel, they could help to keep crude from hitting that predicted $200. One of the oil fields appears to contain eight billion barrels of crude. The other has 33 billion, which would make it the third largest oil deposit in the world.

The Brazilian claim becomes even more spectacular. Petrobras, the country’s big oil company, says the field can product enough oil to "supply every refinery on the U.S. Gulf Coast for 15 years."

The oil fields are far out in the ocean, so drilling them will be difficult, but certainly not impossible.

It maybe hard to separate fact from fiction in terms of how large the new discoveries actually are, but all expert agree that they are mammoth.

The news should come as some great relief. It may give the West some leverage with OPEC. The Brazilians could certainly undercut the cartel to pick up business. Even at $80 a barrel, the South American country would be making tens of billions of dollars a year.

Now, all that remains is for Brazil to create its own sovereign fund with the money it makes from the oil. Then it can buy some American banks.

Douglas A. McIntyre