Yup, we have adequate supply for time being, there is no shortage around the world. We don't see petrol station running out of petrol nor we see power station running out of diesel.

But the problem come from, as people think it is non-renewable resources then automatically people will think price will get higher due to it is not a renewable supply materials. So people will speculate the price will go higher so traders, speculators come into the oil futures market to buy oil eventually causing demand ballooning beside real demand increase from China, India etc. So you have double effect on demand side. While supply side there is no shortage, but there is not extra significant spare capacity to meet those 2x effect from demand (demand from traders, speculator, commodity funds etc + real demand increase from China, India). So price keep on spiralling up as there is imbalance of demand and supply side on futures market.

But in real physical oil, supply and demand is at equally equilibrium. If there is a real imbalance in physical oil, then we will have shortage in petrol station, power station can't get enough diesel and aircraft find difficulty to buy jet fuel. This imbalance supply and demand did occur during 1970's whereby you saw petrol station put up a notice 'run out of petrol'. But now, we haven't seen it.

Actually, oil proven reserves without new oil field being explored or extract oil from oil sand, it at least will able to supply human kind usage for at least 30-40 years time.

So oil price currently has some degree of speculation in it which create a lot of artificially demand (those whom are not going to use the physical oil anyway). But how high oil price can go has its limit. If price goes up too high, then it will be kill the demand. Just like recently, after petrol price increase, sales of petrol in litres is decreasing, and traffic jam is some place is lesser. So if oil price is too high, it is demand destruction factor eventually will bring the economy into recession, then oil price can go down because demand become lesser.

Actually if world economy especially like US and China go into recession, then oil price will face some difficulty to go up anymore. But China is growing at robust rate until now, a red hot economy.

Just my view.

This post has been edited by cherroy: Jun 21 2008, 04:20 PM