Six months on, after the turbulent events in the Middle East-North Africa region and the International Energy Agency's futile and self-damaging gesture with the drawdown of strategic oil inventories, it is beginning to look ever more doubtful that OPEC's "surplus extraction capacity" actually exists. If that is the case, global oil supply will simply not be able keep up with growing demand.
I am sure that the gulf states, especially Saudi Arabia, UAE, Qatar, and Kuwait, appreciate the need to keep oil prices within a band that does not ruin the still-feeble economic growth of the Organization for Economic Cooperation and Development. But they appear helpless to demonstrate that any significant "surplus supply capacity" actually exists, let alone grow fast enough to supply Asian demand. One is uncomfortably reminded of events in 2008.
If something doesn't happen quite soon and oil prices rise much further than they have already, we will see another price spike to (say) $140/bbl followed by a double dip and, of course, another round of demand destruction, and so on and so on.
Is it not time that Oil & Gas Journal reopened the question of whether, this time, we are on the cusp of falling supplies of truly affordable oil? If so, we must, absolutely must, plan for the awesome consequences.
Hugh Sharman
Principal, Incoteco (Denmark) ApS
Aalborg, Denmark
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