Mark Jones: right as rain

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, May 16, 2004
Tight Oil Supply Won't Ease Soon
By NEELA BANERJEE

Two dollars for a gallon of gas? Get used to it. High fuel prices are 
here to stay, at least for the near future, because no relief is in 
sight for tight oil supplies.

Most oil-producing countries and the major oil companies already produce 
all they can. Smaller companies and wildcatters are reopening some 
mothballed wells, but their combined output is not nearly enough to 
affect the global supply. What little spare capacity there is is almost 
entirely in Saudi Arabia, which is willing to pump more — but the extra 
oil it could produce quickly is too heavy in sulfur for the main 
consuming nations.

The world economy has learned to roll with oil price spikes, so long as 
they are short-lived. But sustained high fuel costs will strain its 
ability to cope, experts say, and the current run-up is already starting 
to bite.

Wal-Mart Stores, for example, said last week that higher gasoline prices 
in the United States had taken an average of $7 a week out of the 
pockets of its customers, leaving them less to spend on other goods. 
Sales of some of the largest and most gas-hungry sport utility vehicles 
were down last month, compared with a year earlier. The nation's trade 
deficit widened to $46 billion in March, largely because of oil imports. 
And in Britain, the government is making contingency plans in case of 
mass protests against high fuel prices, the trade journal Platts Oilgram 
News reported Friday.

The oil industry is constantly looking for new supplies, and with crude 
oil closing at a record high of $41.38 a barrel in New York on Friday, 
producers have plenty of economic incentive to step up output. But 
developing a new oil field takes time, and energy companies can do 
little to rush projects, industry experts said.

Marathon Oil, a large independent company based in Houston, is pumping 
its fields flat out — the equivalent of 365,000 barrels a day, counting 
crude oil and natural gas. That includes new fields in Russia that 
produce 15,000 barrels a day. Those fields have the potential to yield 
an additional 45,000 barrels, but only after five more years of 
investment and work, said Paul Weeditz, a company spokesman. Marathon's 
new projects in West Africa will take even longer.

"Companies are always under pressure to grow production, so they are 
always trying to bring new wells on," Mr Weeditz said. "Many people may 
think it's a matter of turning the tap on and off, and that there's 
excess capacity, but that's just not the case."

full: http://www.nytimes.com/2004/05/16/business/16OIL.html

--
Marxism list: www.marxmail.org