Experts Predict Imminent Oil Squeeze
Prensa Latina – April 3, 2008
The oil price could hit $160 a barrel as soon as next week, says ´Zapata’ George Blake, the Texan oil analyst quoted by the London-based online newsletter Money Morning.
‘Zapata’ George has a habit of making bold calls that often seem to be proved right. He thinks there’s an imminent supply squeeze ahead, which will cause the oil price to spike.
But, first, Money Morning dispels a couple of common myths about oil. Number one, there is a belief that demand for oil will go down in a recession.
In the last 58 years, according to Worldwatch estimates (based on sources such as BP and the International Energy Agency), year-on-year demand for oil has grown every year, except for two brief periods.
Between 1973 and 1975, amidst a global energy crisis, global demand decreased annually by a whopping 0.01 percent. And between 1979 and 1984 consumption growth levelled, the biggest annual decrease being in 79-80 - down a devastating 0.04 percent.
Thus, demand for oil will not fall by any significant amount, even if the US goes into recession.
Oil myth number two is that increased production will meet demand.
Money Morning reminds those who affirm that, where are the discoveries that will lead to new production?
The last major oil frontiers were discovered as long ago as the late 1960s – the North Sea, the North Slopes of Alaska and Western Siberia.
Since then, there has been some reduction in the number of discoveries, but, more significantly, a huge reduction in their size. In the 1960s over 500 fields were discovered; in the 1970s, over 700; in the 1980s, 856; the 1990s, 510.
But in this decade just 65 oil fields have been discovered.
Of the 65 largest oil producing countries in the world, up to 54 have passed their peak of production and are now in decline, including the USA in 1970/1, Indonesia in 1997, Australia in 2000, the North Sea in 2001, and Mexico in 2004.
‘Zapata’ George points out that the extreme cold spell in February in Alberta in Canada meant that the tar sands couldn’t be mined. One refinery in Edmonton had no oil to refine, while the larger Strathcona Refinery was running at significantly reduced rates due to ‘operational problems’.
He then mentions Australia, where there are currently gasoline shortages. BP and Shell have apologized, citing ‘constraints on imports’, leading to ‘unprecedented level of fuel shortages’. The four biggest oil refineries in Australia are not operational.
Meanwhile, Chinese oil demand went up by 6.5 percent in February, and their oil imports have risen by 18.1 percent. In brief, the Chinese are getting the oil, while Canada and Australia are going short.
Last updated 06/04/2008