At $100 a barrel, investors would think oil companies could not get crude out of the ground fast enough. Think of the huge profits now that the price of oil has almost doubled in just over a year.
But, there is no big race to get to all of that crude. That may say the worst about the world’s oil supply and where it is likely to stand ten years from now. The heads of several production companies are now saying that the world is reaching a period of "plateau oil". A former senior executive of state oil giant Saudi Aramco told Reuters "Today’s oil prices are high because there are limited new supplies."
While many oil executives argue that crude supplies have not peaked, a shortage is still a probable reason for high crude prices. The weakness of the dollar and hedging could explain relative short-term run-ups in oil prices, but demand in China, the US, India, and other large economies is not slowing. Big producers like Mexico are keeping more of their own oil for gasoline in their own countries and to build out infrastructure.
At least one thing appears to be true. High oil prices do not seem to be sending producers rushing to increase drilling and refining.
Douglas A. McIntyre
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