"Rationing coming to OECD by 2010"

Some people have mistakenly think that a fall in oil spot prices is signaling the return to happy times.

Not so.

While US and OECD demand is indeed shrinking, Asian demand is still growing faster.

As long as the whole world economy doesn't go to a deep recession, it is very unlikely that oil prices will hit the previous very low levels.


In fact, in a recent report released by a fairly conservative Dutch Clingendael International Energy Program, the price floor is is at $110 USD.

Further, the study states that:

• Oil crunch may hit the world by 2010 (not in 2015 as IEA originally warned)
• Oil price is very inelastic in short term (Bank of England is reporting the same)
• Production maximum is at 100-105 Mb/d (this is optimistic, 100 Mb/d is likely to be the absolute ceiling in even the most optimistic case. More likely it'll be near 90 Mb/d)
• Demand rationing will become effective in OECD countries, esp. in the USA (read: you can't buy all you want, even if you have the money - volumes will be limited)
  
• Developing countries will have to cut their subsidies (expect a consequential price rise in their exports like food, clothing, electronics, commodities, etc)
• Geopolitical tensions will continue to grow (Iran, Venezuela, Syria, Algeria, Nigeria ... take your pick)

So there you have it. The Peak Oil news is becoming mainstream even in the political analyst circles.

This is not that far anymore from a direct and public peak oil admission. We are being fed the truth in small doses, in order to make sure that patient doesn't die of treatment shock.