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IEA report on tightening oil supplies

02/07/2008

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The Financial Times has a rather gloomy article on oil supply and prices, following a new IEA report:-

The oil market will remain tight during the next five years as production from non-Opec countries stalls and demand growth remains relatively strong, the western countries’ energy watchdog warned on Tuesday.

The International Energy Agency’s warning is the starkest sign yet that even record oil prices above $140 a barrel have not yet not done enough to balance demand growth from countries such as China with sluggish supply increases.

The article discusses demand for oil and concludes that due to declines in non Opec fields eg North Sea and Mexico and difficulties in bringing new supplies on stream in Opec countries, eg Saudi Arabia.

The article finishes with these remarks:-

The IEA added that a number of highly populous developing countries are getting wealthier. “It is only right that they should aspire to the standard of living seen in the OECD – one that includes the same intensity of use of energy. But if the supply of oil is restricted, then the only way in which balance can be achieved is through a gradual price increase until demand is curbed in OECD countries.”

But the IEA warned governments not to blame speculators. It said: “Like alchemists looking for a way to turn basic elements into gold, everyone wants a simplistic explanation for high prices,” bluntly adding: “Often it is a case of political expediency to find a scapegoat for higher prices rather than undertake serious analysis or perhaps confront difficult decisions.”

That final remark is eminently sensible, given the knee jerk reactions from politicians seen recently and the rather other worldly article this morning in the Dominion from the Bishop of Palmerston North.

Further, it suggests that inquiries into pump prices for fuel and 24 hour price notifications are mere window dressing with no inherent effect at all.

One Comment
  1. 02/07/2008 11:11

    “But the IEA warned governments not to blame speculators. It said: “Like alchemists looking for a way to turn basic elements into gold, everyone wants a simplistic explanation for high prices,””

    Very true!

    Like

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