Wow, this article on international oil supply and demand from the New York Times is fascinating, and not in a good way. Did they fire the editors? It is like a bad action movie – fast-paced, a few colorful characters, far too many plot twists, and if you stop to think you spoil the effect. It just doesn’t add up.
Here is one thread of an idea, followed through the article:
But as prices flirt with $120 a barrel, many energy specialists are becoming worried … Higher prices have done little to attract new production or to suppress global demand, and the resulting mismatch has sent oil prices spiraling upward.
Have you ever actually seen a price spiral upwards? Not me. Nor downwards either. Later in the article:
“It’s a crunch,” said J. Robinson West, chairman of PFC Energy, an energy consulting firm in Washington. “The world is not running out of oil, but rather it’s running out of oil production capacity.”
I think the reporter didn’t understand what “running out of oil production capacity” meant to the story.
In fact, high prices have sparked a global dash for oil. … In some cases, the hunt has been successful. … To make up the shortfall, the world is increasingly turning to fuels made from unconventional sources, like biofuels or heavy oil.
The world is running out of oil production capacity because there is a global dash for oil. This dash is the oil supply response, and it is probably not too soon to conclude the world oil production will be higher this year than last, even as we are short on oil production capacity.
Oil production capacity is expandable, of course, as more tools can be built, more geologists trained, more wells drilled, more reservoirs analyzed, and so on. But just like a new oil discovery doesn’t show up in your gas tank the next day, it takes time.
(HT to The General)