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The Energy Policy Research Foundation Inc. (EPRINC) was incorporated in 1944 and is a not-for-profit organization that studies energy economics with special emphasis on oil. It is supported by approximately 35 oil companies ranging from major internationals to regional marketers.To most drivers, businesses, homeowners and renters, the record-high prices of oil and oil-related products that fuel the country are nothing but a burden and outrage. Little thought is given to how oil went from about $20 a barrel a decade ago to over $100 now. Many point their fingers at oil companies, often without really knowing why.
The oil industry sees a far more complex situation where most factors driving up prices are far beyond their control. "As the market adjusts to a given supply disruption, several more problems quickly emerge. Over the past 10 years, the world oil market has clearly experienced an unprecedented number of new and sustained impediments to upstream development," says an analysis by the industry's research arm, the Energy Policy Research Foundation Inc. (EPRINC).
Of course, EPRINC acknowledges well-known culprits such as war and smaller-scale strife (in Iraq, Nigeria and Sudan) and increasing demand from China and other rapidly industrializing countries. But it also puts considerable blame on governments in some oil-rich nations that are nationalizing or threatening to nationalize oil companies or that are unilaterally breaking contracts based on far lower prices and demanding a much higher price. "The longer term consequences of these unilateral actions are much more than a redistribution of revenue," the paper says. "These actions are likely to result in further reductions in investment in the exploration and development of petroleum resources."
And all of these various factors combine to create prices set not just by demand, but by expectations. And right now, expectations for an improved supply are grim.
POSTED BY: Ken Naugle (March 25, 2008 08:06 AM)
The statement "expectations for an improved supply are grim" is the scariest of all. Some sources believe that world oil production capacity has peaked. Meanwhile, other prognosticators predict a 30% increase in energy demand in the next couple of decades. This confluence of supply being unable to meet demand will spell nothing but trouble that I don't see any easy way to avoid.
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