SHOOT: Supply is not the same as discovery, and discovery peaked about 30 years ago.
The International Energy Agency released its mid-year oil market report this week. It helps explain the recent behavior of oil prices.
First, demand is dropping, which is what caused the price collapse. Second, however, production is also collapsing--even faster than demand.
The other factor in the recent price increase, according to the IEA, is the weak dollar.
Here's a primer from the IEA on global supply/demand dynamics, as well as the key trends for the next few years. The bottom line? We may get a price reprieve until the end of the recession. But then look out.
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