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Long Term Supply is Now An Open Question

There is no question that billions of dollars of buying power in the form of new investors , ETFs and Hedge Funds have some effect on price. However, there is no hedge fund forcing Exxon and Chevron to do more to replace their reserves - which they need to do. The International Energy Agency is set to revise its supply projections - that is , to lower their supply forecasts . according, to a recent report in The Globe and Mail . It had previously stated 100 million barrel a day demand by 2030 would be met by expanded production - by that time . " .. the agency is now worried that aging oil fields and diminished investment that companies could struggle to meet ( expected demand in the future ) "

Exacerbating the high oil prices are production problems in Russia, the world’s second largest oil exporter. Aging oil fields and a lack of infrastructure investment has led to the country’s first annual production decline in 10 years. Output fell 0.9% to 9.76 million barrels a day in the first five months 2008, Bloomberg reported. "Growth last quarter fell on a year-on-year basis, and this has to do with the policies implemented over the prior year to raise taxes on oil industries," Deutsche Bank’s Sieminski said, speaking of Russia’s oil difficulties. "This made it difficult for foreign capital to come in." But "if Russia could reverse some of these policies and get their own oil industry back on, this will help very much" with supply concerns, he added.

"We are burning through supplies at a rate that’s four times to five times faster than we’re discovering new reserves," he said. "Throw in a few [surprises]… perhaps a terrorist event… and add in the accelerating use of oil and gasoline in Third World countries, and we have the recipe for far higher prices."