“Alright!” says the Actress, “You’ve convinced me we have a problem with oil. So what’s the answer?” Well, actually I didn’t. Eloquent and persuasive though I might like to think that I am, what really convinced her was the price she had to pay to fill the gas tank in her car. And it is that way with most of the world. We can talk about the causes, and explain why the situation won’t get better, with graphs and projections and calculations, and most folk will, under the cynical guidance of most of the press, merely look for someone to blame. Oh, and there had better be an answer, pretty quick.

In my last post I tried to show that new solutions take time, more time than I believe that we have available. And because of this, if we are going to get through this evolving period we are largely going to be stuck with the solutions that are already either being introduced or are close to large-scale implementation. Though that is one of the things I tried to allude to in the earlier post about Camry mileage. The scale of the difference between likely supply and demand at a decent price is going to get quite large. If a solution does not provide supply levels that measure in millions of barrels a day (or significant fractions thereof) then it is not going to have enough impact to make much difference in the medium term.

Concerns about a gap in crude oil demand/supply in the 2nd half of 2007 increased in the past months. The International Energy Agency (IEA) and it’s sister organisation, the Energy Information Administration (EIA), have both told the OPEC cartel that OPEC must increase supply to avert rising oil prices. Presently the agencies expect a crude oil demand/supply shortfall of 1 million barrels per day towards the end of the year. However the OPEC cartel is of the opinion that oil markets are well supplied and therefore there is no need to increase supply at the moment.

This discussion, as shown below, boils down to the expectation for non-OPEC supply and world demand in the 2nd half. If the IEA and EIA projections are correct, we will soon find out what is going on in Saudi Arabia with the production of the supergiant oilfield Ghawar.

I was reading the story that Leanan had posted on the IEA estimate for oil demand, and it struck me that we are in that navel gazing part of the year where we try and estimate what will happen to oil supply and prediction. Since it helps to have data, let’s see what the crude oil and gasoline situation looks like, using the EIA data.

It is worth remembering, as we look at the history of crude stocks over the past year that, about twelve months ago we were looking into a future that was anticipating a second bad hurricane season, as well as the usual geo-political machinations and technical problems that would combine to limit crude oil supplies. In the end these were not as severe as we had expected, and the precaution of building oil stocks for the summer was not, this past year, needed as we had a more benign summer than usual.