Saudi Arabia Said WHAT?!?!
It is an indisputable fact that global oil demand has been steadily rusing since the early 1980s. If this trend continues, and I strongly suspect that it will, who will supply the necessary oil to meet this rising demand? Let's take a look at some of top oil producing countries in the world to see if they are up to the task:
Not likely. Mexican oil production seems to have peaked (see chart below). Production at the country's largest oil field, Cantarell is slowing. Huge debates have been raging in Mexico lately because Pemex lacks the funding and expertise to replenish its reserves. As the fight about what to do with Pemex rages on unresolved, the company's production continues to fall (see article: President, oil giant want to ink deals with outsidersbut face fierce protests). Just today Pemex, Mexico's state oil company announced that its oil production slipped 7.8% during the first quarter (see article: Mexican oil output falls 7.8 pct in first quarter. In 2007, its oil output dropped 5.3% and it is down 9.4% from its peak in 2004. The company currently only has enough proven oil reserves to last nine years at its current rate of production.
Nope. Not only is Iran not exactly our friend, but three days ago the country's President Mahmoud Ahmadinejad was quoted as saying "The oil price of $115 a barrel in today's global markets is a deceiving figure. Oil is a strategic commodity that needs to discover its real value." This doesn't exactly sound like someone who wants to increase the supply of oil so that its price can drop. For good measure, Ahmadinejad later added "The dollar is not money any longer but a handful of paper distributed in the world without commodity support."
I doubt it. Last week brought news that oil production in Russia declined for the first time in a decade (see article: Russian oil production has dropped this year for the firs......). Russian government officials have actually acknowledged that oil supply growth in their country appears to have hit a ceiling for now. A vice-president at Lukoil said "The period of intense oil production is over."
#1 Saudi Arabia
Probably not. Huh? What's that you say, Saudi Arabia has increased its oil production when prices have risen dramatically a number of times in the past. Well, not this time my friends. Whether or not you believe that Saudi oil production has peaked, as Matt Simmons outlined in his book Twilight in the Desert (and I personally believe), the country's oil minister, Ali Naimi, recently went on the record stating that his country has no plans to raise its oil production after its scheduled 11% increase in 2008 (see article: Saudis Wary of New Oil Projects).
With the lack of new supply coming on-line, I just don't see how the price of oil won't continue to rise in the long-run, despite what all the bears like Barron's and Gary Schilling say. Don't believe me? Check out what Jim Jubek had to say on the subject today: Why oil could hit $80 a barrel