(Sorry for my silence over the past few days – came down with a doozy of a stomach bug and I’m just now starting to feel like it’s worth living again…)

Saw this online this morning. I’ve been hearing a number of people tell me that the cause of the rising price of crude oil is that there are speculators bidding up the price and that once the oil bubble bursts, we’ll return to a reasonable price of between 30 and 40 dollars a bbl.

There’s one immediate problem with that line of reasoning. First, the fact that the speculation exists and is having an effect is proof that we don’t have enough supply to meet demand. (In fact I read somewhere last week that we presently only have about 1% more capacity in production than we have in demand. Every drop that’s being produced is being snapped up in emerging markets – in spite of a our own drop in consumption this summer.)

Secondarily, the idea that there’s a “bubble” in oil prices is thought to be caused because we have a temporary problem in supply. The idea is that there’s plenty of supply, we’ve just not tapped into existing reserves. Once those reserves come online in about 10 or 20 years, the supply will easily be able to meet demand. (Doesn’t speak to the situation in the intervening years, but at least it’s not “the end of the world as we know it”)

But today there’s a report that there’s been a systematic overestimation in the amount of available reserves by the International Energy Agency (IEA).

According to a post on “The Oil Drum”:

“I have been told by a reliable source that the IEA has been forbidden by the US administration from updating their absurdly cornucopian oil supply and demand scenarios until the report that comes out late this year (after the election); that report, which will publish the result of a ‘bottom-up’ analysis (ie a summary of all existing oil fields, their production and/or prospects) is expected to show that oil production is unlikely to reach the levels that so many have blithely assumed – notably on the basis of previous optimistic IEA reports. The IEA, which was deeply unhappy about the current lies to was supposed to present and support, has been leaking word of the expected content of that new report for many weeks now, including an increasingly alarmist tone in its official reports, such as today’s Medium Term Market Outlook:”

Read the full article here.

If this is true, and given the rise in price, the Saudi apparent reluctance to “open the taps”, the decline in the Mexican and North Sea fields, it means that things are going to get worse not better.

And it’s going to happen sooner than later.

The only good news I suppose is that this is all supposed to become public after this fall’s election. As the article linked above points out, that’s good news. Because up until now we’ve been hampered by not having accurate information informing our public debate.