21 Pages Posted: 27 Nov 2010

Date Written: November 27, 2010

Abstract

An analysis of the global oil market fundamentals indicates that a severe oil crunch could be in the offing probably by 2015 or thereabouts. By 2012, global oil production surplus capacity could entirely disappear if the global economy continues to grow and by 2015 the shortfall in oil output could reach nearly 10 million barrels a day (mbd) causing a severe oil crunch and pushing the oil price to levels matching if not exceeding the price levels reached in July 2008, namely $147/barrel. And while it is difficult to predict precisely what economic, political and strategic effects such a shortfall might produce, it would surely, at best, lead to periods of harsh economic adjustment in the global economy and, at worst, to conflict and even war should one of the major oil consumer nations choose to intervene forcefully. The war on Iraq was a foretaste of what’s to come. This war was instrumental in precipitating the recent global banking crisis and the recession from which the global economy is still suffering.