As expected, the IEA [International Energy Agency] cut slightly its forecast for annual oil demand growth, but surprised the market with a deep reduction in its forecast for supply growth from non-Opec nations, leaving the world more dependent on the producers’ cartel.
It cut its demand growth forecast further by 80,000 b/d to an annual increase of 800,000 b/d because of record high prices, the slowing US economy and the partial removal of fuel subsidies in some Asian countries.
However, the agency warned that so far, there were “very few signs of slowing demand in non-OECD countries where economic growth is far more significant than price in determining demand”.
The cut in the IEA’s forecast for oil demand growth was overshadowed by a larger cut in forecast supplies. The agency cut its forecast for non-Opec supply growth to just 455,000 b/d, or 225,000 b/d below last month’s forecast. It expected most of the non-Opec fresh output to be in the form of biofuels, which would account for 72 per cent of the supply increase.
The non-Opec supply growth forecast for 2008 is now below the growth achieved by the group both in 2007 and 2006, in spite of significantly higher oil prices.
The cost to produce a barrel of oil, worldwide average in 2005 even including offshore, was $17.23. The cost is climbing as explorers go after oil that is harder to recover, but the average barrel, today is unlikely to cost over $40. If the “bubble” breaks, Gazprom may sell oil for $50 per barrel as readily as $250. How soon they forget the oil bust of 1998, when oil dropped to $10 per barrel. They kept selling then.
Will the bubble break? Maybe, maybe not. One thing is likely. Nonproducing countries likely will decrease proportional subsidies on each gallon of gas. E.g. a dollar subsidy to the customer looked pretty good when gasoline cost $1.50 per gallon (50 cents net). It will not look so good at $5.00 per gallon ($4.00 net). At that point conservation will really kick in in countries with subsidies. It is those countries that already know how to live with public transport, walking, biking, etc. In China, for example, cars were essentially unavailable to private citizens, twenty years ago. They still know how to live on a daily basis without cars, reserving them for special use.
And we in this country are learning to “live on a daily basis without cars; reserving them for special use,” like limiting shopping to local stores one day a week, going to Costco once a month to stock up on food, car pooling to work, going to church on Sunday morning and staying for a long coffee hour and socializing with friends, and visiting with neighbors. We often go to a local restaurant for our coffee hour for brunch……nice!
I think we’re getting the idea!
Until the American people start protesting and petitioning Congress to allow domestic drilling and building refineries, nothing will happen.
The Democrats out-voted the Republicans last month to defeat a bill that would have expanded domestic drilling and increasing the US oil reserves. The bill got no mainstream media attention, as far as I know.
Jim Elliott
#2. Cenny, and #3. Jim,
You are both absolutely right. And, on an absolute amount consumed basis, the US can do far more to conserve petroleum than the developing world since we use so much more. It may take 30 years to get there, but we know how to build electric cars and the nuclear plants to build them. Cutting back on driving by even 10% has an immediate impact and is feasible for many of us. A real cut in oil use will hit when half our vehicles are electric.
–Stan
P.S. Jim, I hope during the campaign McCain will air the folly of the Democrats’ vote. Most voters are quite unhappy with $4 and $5 gasoline. The Democrats have worked rather creatively to hold down supply and thus increase prices. I hope the story will get out!
And once that story does get out, watch the backlash against the Democrats. You can hide the truth for only just so long, and once people get the message, watch out!
Try not to forget the value of the dollar has dropped dramatically (and continues to drop) ever since the current administration & the GOP controlled congress completely mismanaged the economy for 6 years by being the “don’t tax but spend even more” party.
#3 [The Democrats out-voted the Republicans last month to defeat a bill that would have expanded domestic drilling and increasing the US oil reserves. The bill got no mainstream media attention, as far as I know.]
Two obvious reasons. One, they can blame it on Bush. Two, they know the lead time will not solve the problem before the election and they will use it in their campaign. A third reason is they play to the econuts who want everybody back in the 1700’s.
We need to look forward, WAY forward, and pour money and talent into engineering vehicles which do NOT depend upon petroleum, period. Too bad the USA is 9 TRILLION IN DEBT due to the GOP/Neocon/Cheney/GWBush war!! That money and talent should have gone into developing world-wide answers to our energy problems, not to supporting the defense contractors we know and love (Halliburton, et al). Sadly, this Administration has saddled future generations of Americans with terrible debt which will limit us. Thanks, GW!!! Thanks, Cheney!!! Thanks, GOP!!!
The best thing either party could do would be to immediately lower the speed limit to 55 mph. Although this would be a far more demanding sacrifice than that demanded of us by our ‘war-time’ President, GW Bush. You’ll recall his stirring call to us: “Go shopping!”
Cana and Cenny,
Just heard on the news that the Dems blocked another bill in committee, so that there was not even any debate on the subject of domestic drilling. No news on the bill because it died in committee instead of on the Floor.
JE
Jim,
Here’s another chance for McCain to “go git ’em!” –Stan
Cana,
That’s assuming McCain feels differently on the subject. I’m not sure he does.