Power struggle: demand for oil is rising far quicker than production

Rising prices at the petrol pumps are a direct result of a lack of oil supply. When there’s not enough to go around, the sellers can name their price. The result is that oil prices have almost doubled, rising from less than $70 a barrel this time last year to around $130 a barrel today.

Any idea that we can simply turn on the taps is wide of the mark. Most of the world’s oil-producing countries are working at full, or very near to full, capacity.
The truth is that the demand in the world for oil is rising far quicker than production, which has been sluggish for the past few years. Despite predictions of a steady growth in production, the world now produces almost exactly the same amount of oil as it did in 2005.

With 50% of the world’s oil now used up, production isn’t getting any easier. As the cost of steel and raw materials have risen, so has the cost of extracting oil – by 6% in the past six months and by 100% since 2000. With governments in the former USSR and Middle East difficult to deal with, and fears that all easily extractable oil has been tapped (although an almost limitless amount of oil can be extracted from bitumen, shale and even coal through elaborate processing, which costs $70 a barrel) and we’ve reached some intangible geological barrier, prices will not fall dramatically any time soon.

Scotsman