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Oil Approaches $100 a Barrel. What Now?
Eric Weiner, National Public Radio
Oil prices are nearing $100 a barrel these days. Prices have more than quadrupled since 2002 and seem to be heading in only one direction: up. The higher oil prices affect everyone from a factory worker in China to a farmer in Iowa. The global oil industry is vast and, at times, confusing. Here are some questions — and answers — raised by the recent spike in oil prices.
Why have oil prices risen so steeply? Is there a single reason?
There are many reasons, analysts say, ranging from a weak dollar to tensions between the U.S. and Iran. At the heart of the problem, though, is the fact that global demand is currently outstripping global supply. Countries such as China and India are thirsty for oil to fuel their economic growth, yet the world’s oil-producing regions are producing less oil. In Nigeria, tensions in the Niger Delta region have curtailed production by nearly a million barrels a day. Fears of war between the U.S. and Iran, one of the world’s biggest oil producers, have driven up prices further. And some of the world’s major oil fields — the Cantarell Field in Mexico, for instance — are yielding disappointing amounts of crude oil this year, for geological, not geopolitical reasons.
Can’t some oil-rich nations simply start producing more oil and bring prices down?
(12 November 2007)
IEA cuts world oil demand view
Says there are “strong” indications higher prices depressing demand
Steve Goldstein, MarketWatch
The International Energy Agency on Tuesday cut its estimate of world oil demand for this year and next, saying there are signs that oil prices close to $100 a barrel are depressing demand.
The Paris-based energy agency said it’s cut its estimate for fourth-quarter demand by 500,000 barrels a day, given higher prices, weaker-than-expected economic data from the U.S. and the former Soviet Union and delays to European heating oil restocking.
It also cut its estimate for 2008 demand by 300,000 barrels a day. The estimate of reduced demand from the West’s top energy watchdog comes just days ahead of a gathering by the Organization of Petroleum Exporting Countries this weekend in Riyadh to discuss the impact of a slowing global economy and the weak dollar, in which Saudi Arabia may push for expanded output.
The IEA discussed at length in its monthly report the impact of $100 oil.
“From a practical standpoint, hitting a round number may not confer any specific damage, but the cumulative $70 rise in price since 2002 is, we believe, having a cumulative effect,” it said.
(13 November 2007)
Energy official calls for steps to cut speculation that has pushed oil prices to near US$100
The rampant speculation helping to push up world oil prices should be reined in by controlling energy demand with conservation and boosting supply, an energy official said Monday.
William C. Ramsay, deputy executive director of the International Energy Agency, said a growing mass of money available for speculation was fueling the trend as the cost of a barrel of oil approaches $100.
“The speculators wouldn’t be in the market if the underlying conditions of the market weren’t advantageous to the speculators,” Ramsay told reporters in Tokyo. “Our attitude is: fix the fundamentals.”
Ramsay said oil-importing countries should work harder to stem the growth in demand through greater energy efficiency and conservation. Suppliers, meanwhile, should be more flexible about providing more oil to the market, he said.
(12 November 2007)
Over a barrel
William Lyons, Scotland on Sunday
The key thing is that we still have excess supply… but when it does fall it’s like stepping off a cliff
WHEN representatives from the Organisation of Petroleum Exporting Countries gather in Riyadh’s King Faisal Hall on Tuesday, they will be standing on the cusp of history. Increased demand, fluctuations in production, a weak dollar and opportunistic trading have all conspired to push the price of a barrel of crude towards a record high.
But oil ministers tend to have long memories. As Saudi Arabia’s minister for petroleum, his excellency Ali Al-Naimi, officially opens the Third Opec Summit, memories of 1998 will not be far off. Back then oil languished at $10 a barrel and many Opec economies were hit hard.
Opec’s policy is to influence oil prices by controlling supplies. But as the present upswing suggests, the oil market is notoriously difficult to control and as prices rise, the global economy is entering uncharted territory.
(11 November 2007)
Oil consumers must help tackle speculation-Khelil
Barbara Lewis, Reuters
Producers and consumers must work together to tackle speculation, blamed for driving oil prices to nearly $100 a barrel, Algeria’s Energy and Mines Minister Chakib Khelil said on Tuesday.
But he said he did not expect oil to rise much higher over the coming months and if price strength led to some demand destruction that might be a good thing.
(13 November 2007)