The WSJ hops on the bad-news bandwagon:
Russia's stumbling production growth highlights a troubling reality: Despite soaring oil prices in the past five years, crude output from nations outside the Organization for Petroleum Exporting Countries has remained essentially flat since 2005, defying the normal link between high prices and increased production....
The economic downturn in the U.S., by far the world's largest oil consumer, has taken some steam out of oil demand. But fast-growing Asia and other places are still adding to demand, and many analysts worry that a global supply pinch later this year could send prices higher.
"There isn't a lot of supply coming on right now, so this [lack of non-OPEC growth] is framing the whole narrative of the market," said Roger Diwan, a financial energy adviser at consulting firm PFC Energy in Washington.
Russia's rising affluence, leading to greater domestic consumption, is also reducing the amount it can export to the rest of the world. Driven by Russia, demand from the former Soviet Union is expected to rise 1.6% this year to 4.2 million barrels a day.
Most forecasts predict that liquid-fuel demand world-wide will hit 100 million barrels a day by 2015. To meet that, producers will first have to make up for steep declines in existing fields. That decline rate now subtracts an estimated 4.5 million barrels a day from annual output.
Former big producers like the U.K., Norway and Mexico are also fighting to squeeze oil from once mighty but now increasingly old and tired fields. In Canada, where output is increasing thanks to massive investments in Alberta's oil sands, production costs now top $65 a barrel by some estimates. Mexico last week pushed a plan to allow its state oil company to enter into service agreements with foreign oil companies, but observers said it may not be enough to attract big investment.
Supply drying up? - check
Global recession? - check
Demand destruction? - check
High prices make oil exporters rich, meaning they consume more of their own oil and export less? - check
Plus remember, shale isn't magic. If it costs $65/barrel to get the oil out, that cost is ultimately paid in energy. Essentially there's a number of real-world factors that limit the "cost" you can pay for a barrel of oil - in theory it could go infinitely high, but ultimately there needs to be a primary energy source used for extracting the oil. Once you hit a certain energy cost(and I would guess $65/barrel when oil is selling for $110 is already close to it), the oil is more of a battery than a source of energy
Oil is used heavily as both an energy source and energy store, and we're nowhere near replacing its role as either
