OIL: A Market Psychology of Fear?


". . .a market psychology of fear will continue to place a 'geopolitical premium' on crude oil. . ."

With or without a binding deal at the climate talks in Copenhagen, it seems the world may have to cut its oil consumption, as emerging geological and economic trends limit the availability and affordability of petroleum.

Back in the 1970s, Saudi Arabia's flamboyant oil minister Sheik Ahmed Zaki Yamani articulated what has become conventional wisdom for global policymakers: ''The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil.''

While the world isn't running out of oil in any absolute sense, a daunting picture on the availability and thus affordability of supply compared with expected demand increases is emerging.

The censored briefings, created in collaboration with Canadian government agencies, paint a troubling picture of future energy security that has recently been corroborated by other sources.

In 2005, the IEA predicted that world oil production could rise to 120 million barrels per day by 2030, up from 85 million bpd in 2008.

The IEA "was forced to reduce" its predictions on possible world supply "to 116 million and then 105 million last year," according to a senior official in the organization, who spoke with The Guardian on the condition of anonymity.

The U.S. DOE has also been quietly scaling down its numbers on possible supply.

In its latest forecast, released Nov. 10, the IEA predicted that world oil supply would hit 105 million barrels per day by 2030. Even with those figures, which many analysts, including some inside the IEA, consider overly optimistic, there is likely to be a shortfall of some 11 million barrels per day by 2030.

According to the confidential RCMP documents, "[censored]. . .a market psychology of fear will continue to place a 'geopolitical premium' on crude oil, keeping prices for oil products higher than market fundamentals along would dictate."

The IEA is trying to placate this fear. However, many believe a binding deal at Copenhagen seems a more reasonable approach to reduce oil dependency than the current policy of fudging the numbers.

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