Krugman is right: it looks like it might be yet another case where us DFHs were way ahead of everyone else. Not that we'll ever get any credit for it, of course.
More from WSJ:
Russian oil production, for years a vital source of new supplies for world markets, is showing signs of a slump, adding to uncertainties that have helped push oil prices to record highs.Russian output fell for the first time in a decade in the first three months of this year, according to the International Energy Agency, which represents industrialized oil-consuming countries. It said Russian production averaged about 10 million barrels a day, a 1% drop from the first-quarter of 2007....
Russia's stumbling production growth highlights a troubling reality: Despite soaring oil prices in the past five years, crude output from nations outside the Organization for Petroleum Exporting Countries has remained essentially flat since 2005, defying the normal link between high prices and increased production.
A previous version of the article quoted by Kevin Drum included this paragraph:
Many big producers like Saudi Arabia, however, are now looking to preserve some fields for longer-term gain, instead of pumping to meet rising world demand. Saudi news reports quoted King Abdullah over the weekend saying that new oil finds in the kingdom should be left in the ground. "With grace from God, our children need it," he said.
To which Kevin responds:
That's a change of tune from the Saudis. Until now, they've been telling analysts that they have loads of capacity and can put it on the market whenever they want. But I guess that's no longer operative. The new story is that they have plenty of great opportunities -- honest! -- but they're saving them for their grandkids.
Well -- maybe. And it's true that both the Saudis and the Russians have megaprojects due to come online over the next year or two, so it's not as if they're just twiddling their thumbs. Overall, though, oil at $100 a barrel sure doesn't seem to be spurring the kind of additional production you'd think it would. It's almost as if there's no net additional production to be had.
There are essentially two school of thought here. On the one hand, you have the free marketeers, a group who have long argued that higher oil prices will lead to more exploration, and more exploration will always lead to more discoveries, so although prices might rise, we really don't have any reason to fear running out of oil. On the other hand have been the Peak Oil people, a group who argue that for a whole host of non-economic reasons we are likely at or near peak capacity, so declining supply is likely to be a very real problem in the very near future. So far - as in, for the last 20 years or so - the first group has always been right. The Peak Oil people have always had an answer for that - the collapse of the Soviet Union, for example, led to a serious, immediate, but nevertheless temporary decline in the world's energy demand - arguing that short term trends have only delayed the inevitable. According to both Krugman and Drum, those delays have come to an end.
And that to your list of worries, I suppose...
UPDATE: Many more details here from Paul Krugman.
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