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Mac Slavo
SHTFPlan
News headlines as of late have been alluding to the idea that the reason for rising oil prices in the last 18 months is OPEC’s refusal to boost supplies.
The global economy can withstand an oil price of $100 a barrel, Kuwait’s oil minister said on Saturday, as other exporters indicated OPEC may decide against increasing output through 2011 as the market was well supplied.
Analysts have said oil producing countries are likely to raise output after crude rallied more than 30 percent from a low in May because they fear prices could damage economic growth in fuel importing countries.
Source: MSNBC
The trend of higher prices in oil and other commodities will most certainly put strain on an already fragile global economy, but is OPEC to blame?
United Arab Emirates Oil Minister Mohammed al-Hamli said crude oil inventories are “quite high. It’s the highest over the five years average… The market is well supplied.”
Source: MSNBC
We tend to agree with the UAE oil minister in this regard, and anyone who takes a brief peek at the following chart will realize that this is not an exclusive problem of supply:
The above chart depicts oil (and liquid fuel) production numbers from 2001 through September of 2010 for OPEC (light blue) and other producers. One thing you might notice right off the bat is that there has been no significant decline in production and the numbers are only slightly down from 2008 when the price of oil peeked at $140 per barrel. You’ll also notice the black line which tracks the price of oil. Notice how the price rises and falls, without any direct relationship to the actual production capacity.
Thus, we can conclude that the current rise in oil prices is likely not due to a lack of production. The next obvious question is, what about global demand? Given that China, India and other countries are cranking up their need for oil daily, it is almost guaranteed that demand will rise – and without boosting production we will certainly see a rise in the price of oil. However, it doesn’t seem that current demand for oil is anywhere close to justifying a price boost of 30% since May of 2010 and the average $3.10 gas we’re seeing today.
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