IEA sees oil supply crunch looming

IEA sees oil supply crunch looming - Yahoo! News

Now the International Energy Agency is admitting that supplies won't meet demend through at least 2012. They are essentially admitting that 70$ barrel oil should be seen as normal for the foreseeable future if not higher prices. This is quite a contrast to just two years ago when the same agency said that 2006 would be a blip and that there would be plenty of oil coming on-line in 2007. They predicted there was no reason to believe that oil should be greatly above $40/barrel through the end of the decade.

Iran's own oil consumption dilema

The figure below is one from an article on goldseek.com (click on entry title) that addresses subprime mortgages but tosses in a very interesting discussion of the oil situation in Iran. Many wonder why Iran is rationing fuel when they are one of the biggest producers of oil in the world at around 4 billion barrels a day. The fact is that the Iranian government subsidizes gas prices such that a gallon of gas only costs around 43 cents. The graphic below illustrates that Iran spends a whopping 38% of their state budget on these subsides. As population increases and oil prices increase that percentage will grow. Their oil production may decline because of the very poor investment environment there. The end result is that Iran is in grave economic danger despite the seeming plenty of their oil resources. The world should be concerned because we are counting on increased oil exports in the future rather than decreased.