Supply and demand – the oil genies we need to tame | The National

Supply and demand – the oil genies we need to tame | The National:



"The classic 1996 book by the United States economist Morry Adelman Genie Out of the Bottle describes how the Opec countries discovered they could increase oil prices by restricting supply – then overplayed their hand and triggered a price crash. Now the oil exporters have let two genies escape – and neither of them offers good wishes.



Supply and demand are the two genies, and the Opec countries and Russia unleashed them by accepting very high oil and gas prices over the past decade. Some major producers, such as Iraq, could not increase output significantly because of well-known political problems. But in many cases, countries made a deliberate choice to let their production decline, or at least increase only modestly – even in the face of rampant Chinese demand and prices that in the space of seven years soared from US$20 per barrel to $147. 




The first genie is well-publicised – escaping from shale rock deep under North America. Although the technologies of shale oil and gas extraction were developed from the 1980s onwards, it was the stimulus of high oil prices that led to their rapid development and deployment. Oil output in the main US shale areas of North Dakota, South Texas and West Texas rose from less than half a million barrels per day in 2008 to more than 3 million barrels per day this year."



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