Executive Summary
- The Inevitable Supply Crunch
- Why The Central Planners Are Making This Worse
- Why The US Shale Industry Will Implode (And Soon)
- The Growing Geopolitical Risks To Oil Supply
- The Shock Felt Round The World
If you have not yet read Part 1: Why The Coming Oil Crunch Will Shock The World available free to all readers, please click here to read it first.
As I’ve written extensively in the past, there are four entire years of missing upstream oil and gas investment (2014—2017) that will lead to an equivalent period of missing oil and gas supply sometime in the future. With the usual 5-7-year lag between discovery and production, my time frame for that was somewhere between the end of 2018 and 2022.
When — not if — that supply shock hits, there is no amount of fresh investment money that can rapidly bring new supply on line. Doing so just takes time — measured in quarters or years:
As we enter into the second half of 2018, the supply/demand balance has already tipped into a slight deficit. I am clearly predicting that:
- this supply imbalance will only get worse, and that
- oil prices will have to rise to compensate.
The only development that could possibly prevent this from happening would be a rip-roaring recession, as only economic decline has proven to be able to reduce demand by as much as will needed to avoid this supply crunch.
(Source)
As we can see from the above chart the world has been steadily increasing its oil consumption, year after year, and that most of the new demand is coming from the non-OECD countries – China and India mainly.
That’s what the data is telling us and that’s what it’s been telling us for decades. That demand is also going to continue to exist and grow as long as the world continues to pursue economic growth.
That’s just how it is right now. We’re not able to run an ultra large container vessel (ULCV) logging in at 194,000 tons on batteries.
by cmartenson 
