Toronto Star. In Canada for a tour of the oil sands, US Energy Secretary Bodman remarked on Friday that the world’s oil suppliers have lost control of the markets, ceding that power to traders and giving rise to greater volatility in crude prices.
After hitting an intraday high of US$78.40, the price of crude for August delivery settled at US$77.03 US a barrel on the New York Mercantile Exchange Friday.
“This is the first time in my professional lifetime that the suppliers of oil in the world have really lost control of the markets,” Bodman said during a two-day trip to Western Canada where he toured the rapidly developing oil sands region in northern Alberta.
“They are unable to turn the spigot and increase supplies, and therefore are unable to control oil prices.”
Also on Friday, OPEC issued a statement blaming geopolitical factors beyond its control for the recent price volatility.
Geopolitical developments, over which OPEC has no influence, have been behind this sudden rise in volatility, and these have come at a time when the market was already out of line with today’s supply and demand fundamentals, with speculation playing a significant role in driving up prices.
Bodman also said that the current run-up in crude prices is directly related to geopolitical instability in key energy producing countries around the world, adding that he hoped prices would recede once things calmed down.
However, earlier in the week, Dr. Ali Samsam Bakhtiari, who recently retired as a senior advisor for the National Iranian Oil Company in Tehran, warned that the world’s oil industry has started to reach its peak production rate.
In a speech in Sydney, Australia, he said that the oil industry had hit a peak production of 81 million barrels per day, which would decline to 55 million barrels per day up to 2020.
We are consuming, world-wide, 30 billion barrels of oil every year. It is an enormous amount. But what is the industry finding? It is finding something between four and six only. So every year that passes, that we have passed in this century, we had a deficit on consumption versus finds.
I hope that the oil industry will not go into Antarctica but, today I am not so sure, you know, because when the price will be $200 or $300 per barrel, then anything can happen.—Dr. Bakhtiari