OPEC says oil supply gap looms later this year | ReutersIn its monthly report published Friday, OPEC said world demand for its oil would average 30.7 million barrels per day (bpd) in the second half of the year, much higher than the 28.97 million bpd the 12-member group produced in May.
The figures suggest the world will be undersupplied by 1.73 million bpd -- enough to meet demand in an economy the size of France -- if the Organization of the Petroleum Exporting Countries does not increase supplies.
From a separate report in CNBC describing an interview with former CIA Director James Woolsey:
News HeadlinesHe told CNBC Friday that to be really secure, the U.S. has to "break oil’s monopoly over transportation and to break OPEC's monopoly over oil. If we can get a handle on transporting ourselves using other substances—electricity, natural gas, methanol, ethanol, whatever—we can begin to turn the corner on the ideology and the amount of resources they have to pour into terrorism against us."
Should a supply gap emerge, and Saudi Arabia still has spare capacity that can postpone that development, it is highly likely that U.S. policy makers will again head down the path of asserting that there is little the U.S. can do about the situation. What won't be mentioned, as usual, is that the lack of strategic flexibility on the part of the U.S. is directly the result of the deliberate choice the nation has made to avoid the development and implementation of a credible energy policy. Of course, each Administration, including the current one, has devoted significant rhetoric to energy policy. However, political rhetori is no substitute for the persistent lack of imagination and lack of investment.
The absence of robust and sustained investment in increased energy flexibility is, in fact, a robust and sustained investment in energy vulnerability. U.S. vulnerability to a supply gap or, even worse, use of oil as a political weapon by Iran or some other hostile oil producer, is greater than it would otherwise have been. Given the political and social challenges in many oil-producing countries, U.S. geopolitical risk exposure is also higher than it would otherwise have been.
Tragically, just as has been the case since the nation's first energy crises in the 1970s, I expect that nation's policy makers to ignore Mr. Woolsey's warnings. Consequently, in substance, the invitations for a future energy crisis will continue to be drafted by today's policy makers.