Oil Supplies Rise, Oil Demand Flattens -> Oil Glut

While ever new supplies of petroleum continue to grow from Iraq, Africa, Central Asia, Canada, Brazil, and elsewhere, oil demand keeps dropping due to the global economic doldrums, and due to many countries cutting their subsidies for oil and gas to consumers.

In a process will almost surely take years and vary significantly from one country to the next, the hydrocarbon-rich countries of the Persian Gulf are slowly but surely moving to phase out heavily subsidized energy prices, starting at the pump. _EnergyTribune

The UAE, the world's third largest oil exporter, cut oil subsidies twice in 2010, and one oil official said petrol prices could rise again this month as the government moves to phase out subsidies that have strained the budget. Abu Dhabi's state oil firm denied that such a move had been decided. _ArabianBusiness

...several countries in the Middle East still experience domestic supply shortfalls due to growing demand in the electric power and industrial sectors. To address this, the Middle East and North African region is now developing various approaches to phasing out price subsidies to align domestic natural gas prices with export prices, the agency in its International Energy Outlook 2010 (IEO), said. _Zawya

Energy pundits continue to predict huge new oil demand from China -- even while China is teetering on the brink of a deflating construction bubble and blowback from massive economic corruption. With the US and Europe struggling with economic slowdowns and institutional mismanagement, China had been the one bright spot for energy commodity optimists.

The only thing holding oil prices above $50 a barrel has been the massive use of energy financial instruments as a "safe haven" for big investors. But big investors can quickly flee a stagnating sector -- as was seen in the summer of 2008 -- causing cascading price collapses.

Miles driven by U.S. motorists have fallen over the last couple of years for the first time since such statistics have been collected, indicating that the American love affair with the automobile could be waning. And gasoline demand in China, the world's largest automotive market, may not skyrocket after all, as the government ramps up its drive to replace internal combustion engines with electric vehicles.

An Israeli economy running on, and exporting, large domestic supplies of natural gas is only the most glaring of the geopolitical game-changers that $50-per-barrel oil would entail. Big growth in Iraq's oil industry would lead that country into discussions, and possible disputes, with Saudi Arabia over OPEC's production quotas. The worldwide gas surplus has already reduced the incentive and ability for Vladimir Putin's Russia to engage in power games with gas importers in Eastern Europe. And, of course, cheaper oil from non-OPEC nations could limit the political focus in the U.S. on foreign oil supplies -- and reduce Congress's urgency to pass a comprehensive clean-energy bill.

More than anything, though, the looming oil surplus calls into question the concept of peak oil, at least in the near future, along with the whole science of forecasting future oil supplies. Adam Brandt, a professor at Stanford's Department of Energy Resources Engineering, released a study last month examining the various models that have been used to predict the future of world oil supplies. "Data do not support assertions that any one model type is most useful for forecasting future oil production," Brandt concludes. "In fact, evidence suggests that existing models have fared poorly in predicting global oil production." _Fortune

Predictions for global oil production along with predictions for global climate change, have been abysmally bad -- perhaps due to the shoddy nature of current computer models being used to preduct these dynamic situations.

Perhaps in 20 or 30 years, newer and better models for predicting oil production and global climate change may give us a better idea what to expect in the future.