While many news stories have carefully followed the price of oil over the last few weeks and months, many have missed the distinction that unlike the late 70’s, this price spike results from overwhelming demand, rather than an unnatural crimp in supply, as was the case with the embargo — the last time we saw prices near $100 a barrel (adjusted for inflation). Worldwide demand for oil simply continues to outpace production, but the clarion voices calling out that fact have largely been ignored.
The high prices have done little to stem the rise in demand. As India, China, and other countries grow rapidly and add more cars to their roads, requiring more and more oil, executives and researchers within the industry are pointing to the fact that our ability to find and pump the oil may be outstripped by rising demand.
The Wall Street Journal has legitimized concern that oil production simply won’t be able to catch up with demand in a recent front-page story. However, it is important to note that the Journal covers the situation from a perspective of peak production, separate from the more controversial debate over whether or not we have reached or passed the “peak” in global supply.
From the piece:
“A growing number of oil-industry chieftains are endorsing an idea long deemed fringe: The world is approaching a practical limit to the number of barrels of crude oil that can be pumped every day. Some predict that, despite the world’s fast-growing thirst for oil, producers could hit that ceiling as soon as 2012. This rough limit — which two senior industry officials recently pegged at about 100 million barrels a day — is well short of global demand projections over the next few decades. Current production is about 85 million barrels a day.”
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