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At some point in the near future the warring factions within Iraq will decide that they would rather have a piece of the oil pie and stop fighting. This will be followed by development of the oil resources and, eventually, an oil glut.
No way. Let's imagine that, indeed, all suddenly goes well, Iraq becomes peaceful, investment is made and production goes up. An extravagantly optimistic scenario would be Iraq's production jumping up by 4mb/d. That's 2.5 years of global demand increase, at current rates. Not quite enough for a "glut".
In the long run, we're all dead. John Maynard Keynes
I mean that when conditions change over the short term, whether from Iraq coming on line or a recession or whatever there will be more supply than demand. This may be short lived, but it will be a "glut" at the moment.
Speculators don't care what happens after tomorrow, tomorrow is when they place their next bet.
We have a "glut" of ethanol in the US, even while we could actually be using more. Why? Local conditions - feedstock price rises, poor distribution facilities, over building in the short term and perhaps other factors.
Remember the oil companies have a vested interest in creating a "glut" when alternative fuels start to challenge their dominance. You can drive a small firm out of business relatively quickly by lowering prices below their cost of production. You don't even have to do it globally, just in the region in which they operate.
This technique is why we have seen little innovation over the past 50 years. Every time something appeared on the horizon (say electric cars) fuel prices suddenly dropped and the technology was abandoned.
I think we all agree on what will happen over the long term, but that doesn't mean things won't happen in counterintuitive ways along the way.
Policies not Politics
---- Daily Landscape
The only question is whether the market will beat an orderly retreat or not.
No prizes for my view on that...
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