By most accounts, The International Energy Agency is the leading expert on the future of the price of oil. It collects production data, future yield from existing fields and those that may be drilled years from now, and import and export trends.
The IEA has concluded that supply is dropping fast enough that oil could spike up again next year. Maybe.
According to CNNMoney, one of the IEA officials said, “when the economy starts growing, recovery comes again in 2010 and then onward, we may have another serious supply crunch if capital investment is not coming.”
While that assessment may be true, it does not take into account the fact that the recession could go well into 2010 and beyond. It also fails to look at how much oil has been taken out of the ground in the last year but has not been shipped to oil consuming nations.
There are still plenty of large producing fields around the world. They are pumping less due to lack of demand. That could change quickly. The argument about supply being hurt by less exploration and aging fields may be true, but it is not likely to play a role in pricing for several years.
Douglas A. McIntyre
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