Thrills! Chills! High Oil Prices! A Roller-Coaster Ride of Excitement!

Michael Giberson

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.

Still later:

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)


2 thoughts on “Thrills! Chills! High Oil Prices! A Roller-Coaster Ride of Excitement!

  1. Mike,

    Readership and revenues are sinking. Editors are expensive. Reporters (or journalists) who understand the topics they cover are also expensive; and, they are generally “beyond” the “thrills and chills” stage of life.

    It appears the “old gray hag” has decided to try Botox and Clairol to restore the appearance of the “Gray Lady”, without great success. Sadly(?), the fountain of youth eludes.

    Economics, geology, regulatory lag and similar concepts are difficult and boring compared to roller coasters. Oil exploration, production, refining and distribution decisions don’t produce instant gratification. Their remaining readers don’t want information; they want answers, NOW.

  2. The regulatory environment, and inability to build new production capabilities are as much to blame as anything. And the NYT loves hog-tying the energy companies in favor of–well–anything that doesn’t make economic sense.

    *cough* corn ethanol *cough*

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