The world's top oil producers are proving unable to put more barrels on thirsty world markets despite sky-high prices, a shift that defies traditional market logic and looks set to continue.
Fresh data from the U.S. Department of Energy show the amount of petroleum products shipped by the world's top oil exporters fell 2.5% last year, despite a 57% increase in prices, a trend that appears to be holding true this year as well.
Obviously, this is counterintuitive. You would expect that as petroleum prices soar, exporters would raise their production to take advantage of the better return. Nevertheless, exports by the top 15 oil suppliers fell by nearly a million barrels per day. That's because the exporters themselves are experiencing a hug spike in demand:
For all the attention paid to China's increasing energy thirst, rising energy demand in the Middle East may pose the greater challenge. Last year, the region's six largest petroleum exporters -- Saudi Arabia, United Arab Emirates, Iran, Kuwait, Iraq and Qatar -- curbed their output by 544,000 barrels a day. At the same time, their domestic demand increased by 318,000 barrels a day, leading to a loss in net exports of 862,000 barrels a day, according to the U.S. Energy Information Administration...
Saudi Arabia in particular has become a major energy consumer as the country pushes to put its oil riches to greater use. The kingdom is in the middle of a major investment campaign to become a world player in petrochemicals, aluminum and fertilizers, all of which will require huge amounts of oil and natural gas.
The U.S.'s top oil suppliers are Canada, Mexico, Saudi Arabia, Venezuela, and Nigeria. Of those, Mexico, Venezuela, and Saudi Arabia all seem likely to reduce their levels of exports in the next few years. Wouldn't it be nice if we had another supplier -- say, a domestic supplier -- to pick up the slack?
The United States is currently sitting on an expected 10.4 billion barrels of oil in ANWR and another 3.65 billion barrels in the Bakken formation, not to mention some 800 billion barrels more in the shale oil of Colorado, Utah and Wyoming. Given the high price of oil today and the questions regarding the dependability of our international suppliers, it's the height of irresponsibility not to begin to plan for production from these and other domestic sources.
Senator McCain may be poorly-positioned to make production from ANWR an issue, but Congress is also slammed the brakes on shale oil development. While McCain may oppose drilling in ANWR, he can still stand up for development of shale oil.
