A combination of calming political situations in numerous oil producing countries combined with enormous gains in US oil production will likely result in deflation for all of the Western world. Inflation rates in the US and parts of Europe are already near or below 1% and there is little indication the trend will reverse, especially if oil prices slide substantially. The US is expected to equal or surpass Saudia Arabia’s oil production level by 2016.
–from The UK Telegraph
From a new report from the parliament of New Zealand: “The world’s oil production capacity may not be sufficient to match growing demand in coming years. The potential for short-falls arises from geological, infrastructure, and political/economic constraints limiting the ability of world oil production capacity to grow while demand continues to rise. If oil supply cannot meet demand a price spike may be triggered, with major detrimental effects on economies, especially those heavily dependent on oil imports…”
By the end of 2013 the US will be the world’s largest producer of oil and natural gas. This is largely due to the technological increases allowing access to previously un-reachable deposits in North Dakota, the Marcellus Shale Formation, and numerous other places.
–from Marketwatch.com
North American oil production, dark green in the chart, has been undergoing explosive supply growth since 2010. Between the new extraction methods used in the US and continued expansion of the Alberta tar sands in Canada, the supply and extraction technology coming from North America will change the global oil market radically over the next five years. Consider the following quote from the International Energy Agency’s press release accompanying this graph:
“The supply shock created by a surge in North American oil production will be as transformative to the market over the next five years as was the rise of Chinese demand over the last 15, the International Energy Agency (IEA) said in its annual Medium-Term Oil Market Report (MTOMR) released today.”
–from Business Insider and the International Energy Agency
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