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Tuesday, July 01, 2008

Interesting Notes From the IEA Oil Report

Reading it again in the Financial Times, I was struck by a few things.

First, here's the growth picture. Mind you, this is in the face of oil prices that are already up 42% in the last six months ...

Global oil demand is expected to grow by 1.6 per cent a year over the next five years, rising from 86.9m b/d to 94.1m b/d. This is despite the IEA having slashed its forecasts for rich countries’ demand because of lower growth, especially in the US, which is struggling under the double burden of a credit crisis and high oil prices.

And production at existing "giant" fields? It's falling off a cliff ...

The fast decline of fields – especially in the North Sea and Mexico where production is shrinking by more than 20 per cent each year – means that 14.8m of the 16m barrels of new supply from non-Opec countries over the next five years will go to making up for losses from old fields producing less and less each year.

And the IEA says don't blame speculators for high prices ...

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.”

Shifting the demand curve is critical. Otherwise, oil is going to stay high and go higher ... $200 a barrel and beyond.

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