Tuesday, April 04, 2006

 

'The Crunch Is Already Here': Saudis

The Associated Press has this report on oil supplies. "The world's only oil superpower boosted output last month. But demand for the world's premiere source of energy is rising so fast — by around 2 million barrels per day each year, that even Saudi Arabia's vast resources will be unable to cope without drastic help, oil executives and analysts say."

"Remarkably, even Saudis, who control over a quarter of the world's known oil, are calling for relief from relentless consumption. 'The current out-of-control demand is not good for us,' Ghazi Al-Rawi, head of private equity at Gulf One Investment Bank, said in a recent interview. 'When you have this kind of demand, you're forced to supply beyond the optimal rate. That's not a positive thing.'"

"Most urgently needed is energy conservation, especially in the United States, which now burns up a quarter of the oil sold to the world, said Saddad al-Husseini, the former head of production at state-owned Saudi Aramco. 'We need some help,' said Nawaf Obaid, a Saudi petroleum adviser with close ties to the government."

"'Can [global consumers] afford to keep increasing demand by almost 2 million barrels a day each year? Is it Saudi Arabia's role to meet that demand?' asked al-Husseini. 'You're leading yourself to having to find an alternative source of energy very quickly.'"

"Sharif Ghalib of Energy Intelligence Research in New York, say the world's cushion of oil-production capacity, a safety margin that keeps a lid on prices, is so low that demand could outstrip supplies now. All it would take is a single oil producer going off-line for any reason. 'The crunch is already here. It's not five years down the road,' Ghalib said. 'There is no thought being given in the U.S. to raising gasoline taxes or increasing mileage on U.S. cars. In China, automobile use is skyrocketing.'"

Comments:
ben, I don't know if you consider water to be money or a metal, but there was a good interview with a water expert on financial sense this weekend. they also had axel merk, who manages a hard currency fund.

big picture, hour 2.

FSO

Big picture MP3
 
What a ridiculous comment by someone who should know better -- the oil man.

If oil is in high supply and they can't keep up, prices go up. For them to blame the consumer for high demand is crazy.

This is where you see the collusion between the oil producers and the various governments -- oil producers cry "peak oil" and the governments raise taxes to try to slow demand. Yet taxes are not the best way to slow demand, the free market does a much better job.

I will repeatedly denounce anyone who says oil is too expensive -- the price of oil versus the ounce of gold is around 9 barrels/ounce, which is where its been for a while now. If oil was truly low in supply, the higher demand would force prices way up, which would stifle the demand in a free market supply-and-demand response mechanism.

There is no supply issue, its all just typical cronyism and protectionism working hand in hand with tax-loving governments.
 
Oil has not been subject to free market conditions in my lifetime. We subsidize it's extraction and borrow massively to protect free "access". We subsidize construction of infrastructure to facilitate its consumption. Yes, if there weren't packs of thugs itching to control it, we'd have something closer to a free market for the stuff.
 
chickenlittle: I definitely agree with you -- oil is nowhere close to a free market. Yet no matter how many collusions and subsidies you throw at something, supply and demand win out. While there COULD be a huge collusion to hide an oil shortage, I doubt anyone would really be part of it. If you know you're running out, why sell it only for US$70? Because someone will threaten to bomb you?

The biggest problem with oil today is that we're throwing so much money to the cronies (refiners, shippers, extractors, and the various taxing bodies of each) that we don't have an accurate gauge of demand. If taxes were removed and protectionism was reduced, what would happen to the price? I could see demand going up, but would price go up considering what the burden of refining and licensing is on the current price, even beyond the tax burden?
 
(If oil is in high supply and they can't keep up, prices go up.)

like say, going from $10 to near $70 dollars in a few years?
 
PEAK OIL! PEAK OIL! PEAK OIL!!!!
 
you got it TJ.
 
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