Oil shortage? Panic-stricken?

The international oil market is fluctuating, oil price is surging. In the past few years, oil price has been soaring like a wild charger, rising from less than $ 30 per barrel at the end of 2002 to $ 60 per barrel at the end of July this year.
Thereafter, oil price continued to climb, on August 8, the crude oil futures price on the New York market reached $ 64 per barrel; it continued to set a record high on August 12, and once exceeding $ 67 per barrel, shooting up by 60 % since July last year. The persistent and unhesitant rocketing of oil price has put the world at a loss what to do and greatly upset the world's people.

However, this seems not all the signs showing people's anxiety. Experts even predict that oil price may rise to $ 70 per barrel within the year, and even soar to $ 100 per barrel in the coming five years. Some American defence and intelligence agents even make alarming presumptions: If oil facilities of the United States and Saudi Arabia were attacked, oil price would riseto $ 120 per barrel.
If riots break out in Saudi, and important supply chains there are cut off, the price of crude oil will possibly shoot up to $ 160 per barrel. No matter whether these predictions and assumptions are accurate or not, the tendency of oil price hike allows of no doubt.
Then, what are the factors that propel the continued rise of oil price, is it oil shortage or is it flustered?

A fairly popular view in the world is: As a monopolistic commodity, oil price is determined mainly by the supply-demand relationship.
At present, under the circumstance in which the amount of oil kept in stock in US oil depot is decreasing and oil imported by Asian countries continues to increase, the market naturally presents a rigid demand; the world's oil refining capability is in acute shortage, additionally, several US refineries have recently suspended production for the repeated emergence of problems and have thus affected oil supply; OPEC has repeatedly announced that it would raise oil output from the original daily output of 28.5 mm barrels to the present 30.40 mm barrels.

The production capacity of OPEC member countries has reached or approached ultimate limit and they lack sufficient motivation to bring about continual increased production. Because it usually takes a period of 3 to 10 years for a new oilfield from prospecting, discovery, debugging and development to ultimate oil production.
What's particularly noteworthy is that the figure of increased production released each time by OPEC lacks transparency, which seems to be at variance with facts, perhaps it may only be a kind of public relation means adopted in order to grab more oil profits. This being the case, the repeatedly jacked-up oil price is the result of the pincer attack made by short supply and strong demand.

Another viewpoint is: at present, it is entirely possible for the production of crude oil to satisfy demand, market supply is normal, and the lack of oil is out of the question. The panic in regard to oil is a manmade phenomenon.
In the opinion of oil market observers, oil price hike may not last long. A certain international energy research institute supports this view, thinking that oil price has approached the beginning of a downturn. High oil price has stimulated various parts of the world to conduct oil exploration, investment in further development of the original oil fields has increased and use new technology to raise the amount of oil recovery, there will be unprecedented, dramatic growth of future oil supply.

A research report shows that global oil output will rise from the present 87.90 mm bpd to 101.5 mm bpd in 2010. Perhaps this output is over 7 mm barrels more than the estimated global demand.
As a matter of fact, the continued lifting of oil price is associated with psychological factors. For example, the death of King Fahd of Saudi Arabia, the largest oil producer in the world; the temporary closure of US embassy in Saudi Arabia; Iran, the second largest oil producer of OPEC, recently announced that it would resume its nuke plan in Isfahan; the situation is unstable in Iraq, the Sudan, Nigeria, Venezuela and other oil producers, all these have caused the frightful atmosphere to spread unabated, spurring oil price to chalk up new records within several weeks.

Another assignable factor is the rampancy of speculation activities. Oil futures, as a kind of financial tool, gives prominence to definite speculative characteristics. The speculation of hedge funds in crude oil and oil product futures has aggravated the turbulence of the international crude oil market.
Currently, the globe boasts over 7,000 hedge funds, their existing trade volume accounts for over 60 % of the oil market, their total assets have been close to $ 1 tn. This enabled them not only to summon the wind and call for rain on the international oil market, and even can produce the effect of "a baton".

Oil shortage and surplus and the rise and fall of oil price have always been a cycling process of international oil production and sales. In the past, people could readily link up the rise and fall of oil price with supply and demand. But today, the situation is perhaps not so simple.
The change of oil price is usually a reflection of various interwoven problems. Of course, the major backdrop is the theory of Adam Smith on the rise of commodity price, the increase of production and the downturn of price, this theory no longer works for the special commodity of oil. Another view holds that we have bid farewell to the gone forever age in which oil was used as water and have entered an era of "internal oil shortage".