Monday, May 24, 2004

Not enough oil?

I don't get it. Oil futures vault over $40. America plays nice with Venezuela so as not to disrupt supplies there, despite the madness that seems to be going on. The Saudis say that they can pump another 2 million barrels a day (taking their output up from 9 million odd to 11 million odd), even though the last time they did that was nearly 15 years ago. The oil stocks are moving higher preparing for an era when oil costs are going to be far higher than previously for far longer. But somewhere, someone must be adding up end to end process capacity - the pipelines, the tankers, the ports, the refinerys - and coming up short. I don't know that you can just pump oil and have it shipped and taken care of just like that. This stuff must be planned like the Queen's diary - months or years in advance. The shippers presumably don't have idle boats. And then there's the question of whether the extra oil is "the right oil"? Will it help reduce the price of gasoline (petrol for us Brits) at the pump? I'm not sure that it will. I think it's too complex for that. The only chance is if the "promise" of more suppliers psychologically boosts the market, driving down the futures price and so making things more affordable. Until the Chinese buy another 90 million cars on top of the 10 million they have now and really hit supplies hard!

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