Circle September 11 on your digital calendar. That’s when OPEC meets next to decide how much pain to inflict on Western economies. “The International Energy Agency kept up its drumbeat for the Organization of Petroleum Exporting Countries to lift oil output next month when it meets, warning Friday that world oil demand is likely to outpace supply this winter and that this gap will widen if the producer group decides not to raise crude production,” reported Spencer Swartz in today’s Wall Street Journal.
It won’t be long before the weekly figures on oil supply and demand are front page news all the time. OPEC supplies 40% of the world’s daily consumption of 86 million barrels of oil. OPEC has some spare production capacity which can supposedly be brought online to relieve price pressures.
But it’s probably not as simple as “pump more oil” anymore. It’s getting harder for major oil producers, be they state companies or private companies, to maintain high production levels and replace that production with newly discovered reserves. Demand keeps rising. Supply does not.
There is no simple substitute for oil, either. More likely is a portfolio of energy solutions that meet various aspects of the demand for energy that oil, coal, and natural gas currently provide. It’s a massive change in the balance of the world’s energy assets. But it’s also a massive investment opportunity.
Markets and Money