The following news release from the International Energy Agency was highlighted on my Yahoo home page.  It suggests a fragility in spare oil capacity that should not be a surprise given recent price action.  Thus, it may be a useful clue to the reality of the current supply/demand relationship. But this sort of publicity does not seem very helpful in damping whatever speculative element is also currently part of the oil price. 

ROME, April 19 (Rome) - Record oil of $117 a barrel calls for a demand response and a supply response, but for now there is little to stop prices heading still higher, the deputy executive director of the International Energy Agency (IEA) said on Saturday.

“We need both a demand response and a supply response,” said William Ramsay on arrival in Rome for talks between energy producers and consumers.

“I certainly hope we’ll start to get a demand response … that’s greater efficiencies and all those things we have talked about.”

The Paris-based IEA, which represents the interests of consumer countries, does not give formal price predictions.

But asked whether he saw oil getting even more expensive, Ramsay said: “There’s not much to get in the way.”

A sustained bull run, which set in around 2002, has been driven by factors including strong demand and chronic under-investment that has left a very limited margin of error in the event of supply disruption.

“If there were greater (spare) capacity, it would reduce the anxiety, so if something happens in Nigeria, say, it would not make a difference (to the oil market).”

Nigeria’s oil output has been disrupted by recurrent attacks and on Friday rebels said they had sabotaged a major pipeline operated by Royal Dutch Shell, forcing the company to shut in what it described as a small amount of production.

Many other oil producing countries have their “own set of issues,” Ramsay said, and international oil companies and the IEA have argued they need to allow greater access to their reserves, so oil majors can help to develop them.

Emboldened by high oil prices, oil producers, already reluctant to allow the international community in, have tended instead to make terms for foreign operators ever tougher.

Tags: peak oil energy investments

This entry was posted on Saturday, April 19th, 2008 at 8:53 am and is filed under Peak Oil, Price of oil. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.