SPerhaps the most interesting supply-side change in 2004 from recent years was the change in 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.
	SThe graph 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 about 1.6-2.0 million barrels per day of extra production capacity – a level seen during the first Gulf War and briefly after the Venezuelan strike and the Iraq war in 2003, and a level considerably less than the 3 million barrels per day or more that has existed for most years since the first Gulf War.
	SThis lack of capacity surplus is a fundamental tightness.  Note that the surplus started to settle at about 2 million barrels per day in 2003 before demand required OPEC to increase production, which dropped surplus capacity to below 1 million barrels per day for much of 2004 before rising again as OPEC was able to pull back on production.