Oil market may be ahead of itself

Stacks of empty barrels used to hold fuel in Baghdad


Bill Radke: This morning, crude oil is at around $83.50 a barrel. You may remember about a year ago, it was more like $52. And that run up in price, according to the International Energy Agency, that's overheated. This morning, the IEA said another big jump could be a blow to the global economic recovery. And we get the story from Marketplace's Stephen Beard in London.

Stephen Beard: The IEA reports that global stockpiles of fuel are relatively high, and oil producers still appear to have plenty of the stuff to pump. Meanwhile, the agency says, demand for oil throughout the industrialized world is sluggish. Europe's manufacturing-led recovery seems to be ebbing.

David Fyfe, editor of the report, says the signs are the oil market has got ahead of itself:

David Fyfe: Prices at or above $85 seem to have moved somewhat ahead of the market supply/demand fundamentals. Underlying fundamentals don't look incredibly tight at the moment.

Nevertheless, other oil market observers say there could be a big surge in demand from Asia in the months ahead. And in the longer term, a report from the U.S. military paints an alarming picture of future supply. It predicts that global oil production will peak within two years, and there could be shortages by 2015.

In London, this is Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.
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I think the most important part of this story is the last paragraph. I read the report and it is indeed alarming. There have been other publications such as "The Long Emergency" and documentaries such as "The End of Suburbia" that predict a drastic shrinking of globalization and world economies. I thought the stories were alarmist and spoke of the future 30 to 50 years from now, but the military report states peak production to be in 2 years. As I search the internet for more information on "Peak Oil", I find many sites dedicated to this issue, but very little from the mainstream media including NPR. Shouldn't we take this more seriously?

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