Investment in exploration can cool hot oil prices

by Kamel Al-Harami

The only solution to calm and stabilize the current overheated oil prices is by investing in oil exploration in order to have enough and reasonable surplus spare capacity. In the past years surplus spare oil capacity was in the region of 7 mm barrels or around 15 % of total world oil consumption.
Today the number is about 1,500,000 barrels or less and less than 4 % of total world daily consumption.

As long as no surplus oil capacity is available in the market, the current high oil prices will prevail without any hope or sign of easing in the near future.
The world is facing acute situation, oil consumption on the increase and is peaking and has reached historical level of 82 mm barrels this year and expected to increase further by 2.5 mm bpd next year. Against such high demand for oil, all oil producing countries should strive to invest and explore and find new oils.

Without increasing oil productions, the world economy will be going through unstable and difficult period. The unexpected rate of growth and pattern of oil consumption have contributed to the present high oil prices and all oil consuming nations are to be blamed, but the manner of USA consumption has caught everybody by surprise.
The USA is consuming 20.1 mm bpd which equates to 25 % of total world oil, and their dependence on imported oil is rising and has reached 60 % and will increase further, unless they cut on their average consumption which does not look or seem likely.

OPEC and other oil producing countries are maximizing their inputs. OPEC as a matter of fact is pumping more than 30 mm barrels and still no impact on oil prices.
The market is however, very fragile and sensitive to any event and the reaction to Russian government order to Yukos its biggest crude oil producer to stop producing and selling was clear illustration to both consuming and producing countries.

We just can't afford any disruption to oil supply now and tomorrow. The risk is big with very limited cushionof spare capacity. Time is running out and the sooner we invest in developing new oilfields the better. OPEC at the same time is required not to curtail or minimize its oil production and should go at full blast. OPEC quota should put on hold, and each member should be free to maximize its production.
It's time again for OPEC to fulfil its established role and responsibility in stabilizing oil prices and to do its best.