The Peak Oil Crisis: The Summer Ahead

The situation is not good. Our average gasoline price just climbed past $4 a gallon and all indications are that it will continue to rise. After Goldman-Sachs made headlines by telling us that oil is going to $150 or maybe $200 a barrel in six months or maybe two years, Morgan Stanley announced that oil was going to $150 dollars a barrel by the 4th of July. Not to be outdone, the CEO of Russia
A good place to start looking at the current situation is with the latest International Energy Agency (IEA) and Energy Information Administration (EIA) monthly reports which were released earlier this week. As could be expected, high prices have led to a drop in demand now projected to be 280,000 barrels a day (b/d) in the U.S. and other OECD countries during 2008. This drop however is easily offset by a 1.2 million b/d increase in demand by other countries such as China, India and the Middle East.

Growth in worldwide oil supply is not doing well. Non-OPEC production is sagging and is expected to increase by only 310,000 b/d this year and OPEC currently is close to producing flat-out out with new projects slipping. OPEC