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May 22, 2008
Sounds incredible, doesn’t it? But given the way gas prices are ratcheting up on an almost daily basis, it is not out of the realm of possibility. Not with the way oil prices are going.
For anyone who has worked in the oil patch, as I did with Petroleum Intelligence Weekly and Platt’s Oilgram in New York in the early 1980s followed by a couple of years helping to set up the energy desk at Reuters, the current surge in oil prices is simply incredible.
And the ramifications are enormous.
But let’s start with gas prices. The national average price for a gallon of regular gasoline is now $3.83 a gallon, according to the Associated Press.
Really? Not around here. On my way down to Westerly yesterday, I saw $3.99 a gallon. Add on that 9/10th of a cent the gas companies love to slide in those tiny numbers – forgive me if I repeat myself – and that’s $4.00 a gallon.
Just weeks ago, that number was seen as a possibility sometime this year. Well, we’re at $4.00 a gallon now and I don’t see any end in sight.
Just look at the crude oil market. At the beginning of the week it was flirting with $130 a barrel; this week we’ve hit over $135 a barrel before coming down to about $132 today. What’s going on?
It’s partly the new demand from developing economies such as China and India; and it’s partly speculation by commodity brokers who are always attracted to prices that are going up.
Now the International Energy Agency (IEA) reports that its previous projections of global crude oil supplies may be off by many millions of barrels a day. According to a front page story in today’s Wall Street Journal, both the agency and the U.S. Energy Department are worried about supply not keeping up with demand.
“The oil investments required may be much, much higher than what people assume. This is a dangerous situation,” the paper quotes IEA chief economist Fatih Birol as saying.
The paper cites all sorts of problems in the global oil patch, including the fighting in Iraq and sanctions on Iran hindering investments in both nations, political turmoil in Nigerian and Venezuela and production slumping in a number of areas.
Earlier this month, Birol told the German magazine Internationale Politik: “We see a sharp decline in production from the existing oil fields, especially in the North Sea, the USA and many non-OPEC countries.”
"Exactly 12.5 million barrels a day are still missing, about 15 % of the global oil demand. This gap means that we could face a supply shortage and very high prices during the next (few) years."
Gulp!
- Peter C.T. Elsworth
Posted by Peter C. T. Elsworth 
at 3:15 PM to Crude oil market
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