DSeid
October 18, 2012, 4:43pm
1
New report from the IEA.
The IEA expects the global oil market to become somewhat less tight over the medium term than it has been through most of the last decade, as a combination of demand and supply factors will cause OPEC spare capacity to return to more comfortable levels. But it also highlights elevated supply and demand risks. …
… Today’s weak economic environment has reduced expectations of oil demand growth for the medium term … On the supply side, most of the growth will come from the Americas, buoyed by the transformative power of advanced extractive technologies applied to light, tight oil deposits in the US and the Canadian oil sands that has exceeded earlier expectations. Among OPEC producers, Iraq stands out as its production capacity is expected to enter a new growth phase, which may continue even beyond the forecast period. These new supply sources are expected to more than offset decline rates and outages elsewhere as well as the continued impact of international sanctions of Iran.
The report also notes a continued rebalancing of refining capacity, with expansions in Asia and the Middle East more than offsetting continued attrition in the OECD. Internationally traded crude volumes are expected to decline sharply, as rising domestic production reduces North America’s import needs and more Middle East oil is kept at home to satisfy growing regional demand rather than exported.
Of course the light tight oil from the sands comes at a greater production cost, so prices can’t drop too much. And recovering economies can spike up demand. Alternatively new economic crises can suppress it.
Place your bets. Five years from now what do you think gas will cost in America? Ten years out? How volatile will prices be in between?
My WAG is averaging $5/gallon over the period. FWIW.