Why is the guzzling so puzzling?

Output forecast grim for non-OPEC nations

Two of the world's most closely watched energy forecasters on Tuesday
slashed predictions for output from oilfields outside the OPEC cartel in
2008 -- more bad news for a global economy struggling with record high
oil prices and tight supply. The dimming outlook for world production
will keep the market on edge even as high prices hit consumers and cut
into the pace of global demand growth. The International Energy Agency,
adviser to 27 industrial economies, cut its expectations for supply
growth from countries outside OPEC to 460,000 barrels per day above 2007
levels, down from 680,000 bpd a month ago. The US Energy Information
Administration, the statistical arm of the Energy Department, cut its
forecast for non-OPEC output growth nearly in half to 310,000 bpd from
600,000 bpd. Both groups have consistently over-shot on non-OPEC supply
growth in recent years. Partly due to the dearth of supplies outside the
Organization of Petroleum Exporting Countries, the EIA raised its
projections for 2008 oil prices by nearly 12%. The EIA said it was still
accounting for a planned non-OPEC supply increase of 820,000 bpd later
this year as big fields in Brazil and Azerbaijan come online. But, given
recent delays, the EIA hedged its bets on the probability of such
supplies materializing as planned. "Given recent history, EIA believes
that the pace and timing of non-OPEC supply growth will continue to be
subject to possible delays in key projects and accelerating production
declines in some older fields," the agency said.
(Calgary Herald, Globe and Mail 080611)

US$250 or bust: oil baffles experts

Oil could hit US$200 by the end of this year, soar to $250 or burst like
a speculative bubble. And as delegates to the Global Petroleum Show
discovered Tuesday, the so-called "experts" are anything but united on
what lies ahead when it comes to oil prices. Gerry Protti, EnCana's vp
of government and public relations, told a panel discussion it's
possible that oil prices could indeed cross the key $200 level. "I guess
it's possible because a year ago we would have said it's unlikely to be
$135 a barrel. Who knows?" However, Mohamed Al Hamli, energy minister
for the United Arab Emirates, warned that $200 oil would seriously
damage the world economy. "I think $200 is too much, especially for the
emerging markets to handle," he said. When pressed on how high oil
prices could go, he replied: "Around the current levels is probably a
reasonable guess." Oil lost $3.04 in New York on Tuesday, to close at
$131.31.

The global oil bulls are calling for further price increases. Alexi
Miller, ceo of Russian natural gas giant Gazprom, said he expects oil to
hit $250 in the "foreseeable future" as competition for energy resources
like oil increases. In April, CIBC economist Jeff Rubin predicted that
oil would average $225 by 2012. Despite the frenzy over windfall oil
prices, Alberta Premier Ed Stelmach said the government continues to
base its economic forecasts on $69 a barrel. "Obviously, it is much
above that," he told the panel. However, Stelmach noted some economists
think oil prices could fall, not keep rising. The premier is not alone
in his pessimism. Sean Cota, a co-chairman of the Petroleum Marketers
Association of America, warned the US Commodity Futures Trading
Commission Tuesday that today's oil prices are a speculative bubble
about to burst and cause havoc for those who actually take physical
delivery of oil. "This bubble, when it bursts it will be in a very
disorderly way," he said. "There is a large group (of speculators) that
is dominating the industry to the point where the physical markets are
immaterial."
(Calgary Herald 080611)

I don't understand what is so baffling. Why are the experts so perplexed by what's going on? I mean, I just heard a report this morning that heating oil imports to China for May were 34 TIMES greater than they were a year ago. Throw in flat production rates (very little increase if any), and you have a classic demand outstripping supply situation. It doesn't seem very baffling to me.

$142 on intraday trading today....predictions of $170 by the end of summer? I guess we'll wait and see whether demand wanes as people think twice about the fifth trip of the day to the mall when gas is $1.50 a liter.