[Texgreen] Are cars doomed?

[Roger Baker]

[[Probably not for the rich at least. However, the evidence keeps  
getting stronger that world oil production has ALREADY peaked and has  
been on a plateau for several years. The only thing that has kept  
this problem from being more obvious already is the fact that the  
world's poor are being bid out of the market. They are being forced  
by price to cut their oil consumption, which frees up some supplies  
for US drivers -- for a time. Here are two stories that make the  
point. The first is a skillful analysis of production over the last  
five years, coming to the following conclusions. -- Roger]

<http://europe.theoildrum.com/node/2651#more>

"... Three main conclusions have been found based on available data  
from January 2002 to February 2007:

1) Total world exports of all fuel liquids have been on a plateau  
since the end of 2004, and declined slightly in the last year,  
despite production increases.
2) Liquids exports from non-OPEC countries as a whole have declined  
since the beginning of 2004.
3) OPEC liquids exports have increased until the end of 2005,  
followed by a short plateau after which a slow decline set in, mainly  
due to declining production in Saudi Arabia..."

                 *********************************************

[Below is the current thinking of the world's top energy advisory  
group, the  IEA or the International Energy Agency, which predicts  
that oil prices will keep soaring in the second half of the year,  
entirely consistent with the first story. The story above indicates  
that the supply problems of the last five years are unlikely to be  
reversed after the immediate supply shortages that the IEA forsees in  
the second half of this year.  -- Roger]

"...Francisco Blanch, a commodity analyst with Merrill Lynch & Co.,  
said OPEC production is now at its lowest level in three years, after  
steep production cuts earlier this year. But he said demand will  
outstrip supply with the outset of the summer driving season, and  
global inventories will be drawn down rapidly."OPEC needs to ramp up  
production to meet the shortfall, and fast!," the analyst wrote in a  
report yesterday. Without a production increase, any minor supply  
disruption could cause prices to spike above $80 a barrel in the  
second half of this year, he said..."


<http://www.theglobeandmail.com/servlet/story/LAC.20070613.ROIL13/ 
TPStory/Business>


ENERGY
IEA expects oil prices to soar
Some analysts feel crude could top $80 (U.S.) a barrel later this year

SHAWN MCCARTHY

GLOBAL ENERGY REPORTER

June 13, 2007

World oil prices will rise sharply in the second half of 2007 unless  
OPEC increases production, the International Energy Agency said  
yesterday, as some analysts predicted that crude could top $80 (U.S.)  
a barrel later this year.

In a report, the IEA raised its forecast for crude demand this year  
by some 200,000 barrels a day, and lowered its expectation of non- 
OPEC supplies by 100,000.

However, officials from the Organization of Petroleum Exporting  
Countries have so far resisted frequent calls from the IEA - which  
represents 26 industrialized consuming countries - to open the taps  
to reduce pressure on prices.

"We would very much hope that OPEC production is at its seasonal low  
at the moment," David Fyfe, analyst at the IEA, told Reuters news  
service. "We definitely do need more crude oil."

The Globe and Mail

Despite a steep runup in prices, the agency forecast the global  
demand will increase by 2 per cent this year - or 1.7 million barrels  
a day - to 86.1 million. China is expected to lead the growth, with  
oil demand there rising by 6.1 per cent.

Analysts said both crude oil and product markets remain tight, with  
inventories abnormally low for this time of year, though they are  
building ahead of the peak driving season.

"Global markets on the global oil side have tightened up quite a  
bit," said Bart Melek, a commodities analyst with BMO Nesbitt Burns  
Inc. "I do think we're going to get $70-plus crude as summer driving  
season peaks."

But he added that, unless OPEC increases production, the market will  
be undersupplied in the second half of the year.

"I think we could easily get to $80, depending on the circumstances  
of course," he said, adding geopolitical tensions between the United  
States and Iran, or hurricanes in the Gulf of Mexico could spark  
price spikes.

Despite the bullish reports, crude prices fell yesterday, as traders  
anticipated a U.S. Energy Information Agency inventory report that it  
expected to show a modest increase in stocks.

But that relief could be short lived. Francisco Blanch, a commodity  
analyst with Merrill Lynch & Co., said OPEC production is now at its  
lowest level in three years, after steep production cuts earlier this  
year. But he said demand will outstrip supply with the outset of the  
summer driving season, and global inventories will be drawn down  
rapidly.

"OPEC needs to ramp up production to meet the shortfall, and fast!,"  
the analyst wrote in a report yesterday.

Without a production increase, any minor supply disruption could  
cause prices to spike above $80 a barrel in the second half of this  
year, he said.

The Merrill Lynch analyst recently raised his long-term oil price  
forecast - covering 2009 and beyond - to $60 a barrel for Brent and  
West Texas Intermediate grades, up from $47.50 previously.

In adjusting his forecast upwards, he cited strong global economic  
growth, improved discipline among OPEC members, lower-than-expected  
non-OPEC supply growth, and the apparent unwillingness or inability  
of consumers to reduce demand in the face of high prices.

Mr. Blanch also noted that inflated oil-field development costs are  
also driving crude prices. He estimated that the new projects in  
Canadian oil sands now require a price of $60 a barrel in order to  
achieve the double-digit rate of return commonly demanded by investors.