Gas Prices Go Up And Oil Supply Forecast Goes Down

Madison drivers woke up to a ten-cent increase in gas prices around the city, bring the average to $3.88 per gallon. Meanwhile in Milwaukee it is reported the price is $4.19.   While I think over the long-term these prices will have a positive influence on forcing us all to better recognize the need for alternative energy sources and smaller cars with better gas mileage, the discomfort in the interim years will be difficult.  The economic pain is real, but it is important to remember that the oil problem America faces is not new.  For decades we have talked about it.  The problem is of course that too few demanded with our votes that something be done to chart a new path in the nation as it relates to reducing our need for a commodity that is entangled with foreign policy.  Now that lack of holding our elected officials, and ourselves, accountable is biting everyone.

As those thoughts rumbled around in my head as I noticed the change in gas prices today, the following news story in the Wall Street Journal really got my attention.

The world’s premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand.

The Paris-based International Energy Agency is in the middle of its first attempt to comprehensively assess the condition of the world’s top 400 oil fields. Its findings won’t be released until November, but the bottom line is already clear: Future crude supplies could be far tighter than previously thought.

A pessimistic supply outlook from the IEA could further rattle an oil market that already has seen crude prices rocket over $130 a barrel, double what they were a year ago. U.S. benchmark crude broke a record for the fourth day in a row, rising 3.3% Wednesday to close at $133.17 a barrel on the New York Mercantile Exchange.

For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently. Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades.

The decision to rigorously survey supply — instead of just demand, as in the past — reflects an increasing fear within the agency and elsewhere that oil-producing regions aren’t on track to meet future needs.

“The oil investments required may be much, much higher than what people assume,” said Fatih Birol, the IEA’s chief economist and the leader of the study, in an interview with The Wall Street Journal. “This is a dangerous situation.”

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