|SThe most interesting change is the world’s
ability to surge crude oil production to either fill in for unexpected lost
supplies (e.g., Venezuela or Iraq) or simply meet unexpected demand strength.
|SThis chart shows an estimate of surplus
production capacity in OPEC. Since
OPEC is effectively the only area that maintains short-term surplus
production capacity, it represents world surplus capacity available to meet
unexpected changes in supply or demand.
|SAt this point, we seem to have well under 1
million barrels per day of extra production capacity – something seen during
the first Gulf War and briefly after the Venezuelan strike and the Iraq war
|SThis lack of capacity surplus is a fundamental
tightness. Note that the surplus
started to settle at about 2 MMB/D in 2003 before demand required OPEC to
increase production, which dropped surplus capacity to current low levels.