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Is Global Crude Really In Short Supply?

With mounting tensions between the United States and Iran showing no signs of abating anytime soon, some commenters are growing worried about a possible global panic centered on a so-called short supply of crude oil. Disturbed by the possibility of additional armed conflict in the Middle East, some are beginning to fear that global crude production could fall below the levels necessary to sustain modern, industrial economies.

Is there any truth to the idea that global crude is really in short supply? Here’s a breakdown of current oil production patterns, and why it’s unlikely we have to worry about global crude drying up anytime soon.

The United States is drilling like never before

The strongest sign that global crude isn’t in short supply is that the United States is undergoing a drilling renaissance, with advancements in fracking technology and better market strategies actually leaving most mainstream investors worried about a forthcoming oil glut, where they will be too much supply, rather than not enough. Nevertheless, some worried investors and frantic pundits are stirring up a frenzy by insinuating that forthcoming armed conflict could lead to a short supply of crude in many vital areas around the globe.

The truth of the matter, however, is that incendiary rhetoric between the United States and Iran isn’t sufficient reason to believe that we’re approaching a global crude shortage. As a matter of fact, extensive reporting from the Wall Street Journal helpfully elucidates the fact that global oil has been falling recently as investors are well-aware of the fact that we could be approaching another oil glut. U.S. oil inventories are reportedly at their highest level since July of 2017, for instance, illustrating the extent to which current U.S. producers are dominating their market.

The American Petroleum Institute’s expectations for the near-future of the crude market are heavily centered on the fact that American drilling is enjoying an unprecedented era of success and prosperity. With new technologies and drilling strategies enabling producers to reach oil deposits in hitherto inaccessible areas, the idea of there being a global crude shortage anytime soon is growing more and more preposterous in the eyes of most experts. Nevertheless, possible efforts on behalf of OPEC and other major petroleum producers could still upset markets, particularly if they make drastic decisions in an effort to radically upend the existing crude marketplace status quo.

We don’t have to worry about “peak oil”

For countless decades, markets and the global public have been beset by fears of so-called “peak oil,” or the mythical point at which humanity will reach its peak oil production capacity before finding itself incapable of meeting rising energy demands. The reality is that we don’t have to worry about “peak oil,” as technological means of extracting petroleum from the dark depths of the Earth are advancing every day, and greener means of generating power are simultaneously gaining headway on fossil fuels, to boot.

With wind and solar energy now being America’s cheapest energy source, for instance, and with this trend being set to continue in most major world markets, there are few if any reasons to believe that the global crude supply is going to be endangered anytime soon. This isn’t to say that unexpected events couldn’t suddenly lead to fear in the oil market, but rather that the idea we’ll be incapable of meeting our crude demands anytime soon is almost entirely baseless conjecture that has no place in reality.

While major businesses often have to concern themselves with global commodity prices, these days there’s so much confidence in the ability of crude producers to hit and even exceed their targets that most businesses are preoccupied with other, more mundane aspects of achieving commercial success. Knowing about the creation of air ducts, how to maintain and expand your workforce, and prepare for the future are all things most modern businesses are more concerned about than a sudden global crude shortage which could upend their operations and drive the costs of doing business upwards.

The trade war could be causing market jitters

One of the reasons that so many people are concerned about the future of energy markets could be the ongoing trade war between the United States and China which was ignited by President Donald Trump. Chinese media sources are mulling about the ongoing trade war, which they continue to believe could extend for some time, despite the claims of some American negotiators that an agreement is immediately forthcoming. The reality of the ongoing trade war is that it’s unlikely to simmer down anytime soon, particularly since the geopolitical tensions which expedited its creation are unlikely to die down in the near-future.

With American and Chinese negotiators incapable of arriving at an agreement that could stabilize the near-future of global energy markets, some investors and pundits are naturally worried about a sudden shortage in global crude that could disrupt economic progress everywhere. Like the paranoia arising from tensions between the United States and Iran, however, these fears are largely misplaced, as the ongoing trade war likely won’t lead to a sudden drought of crude, as this wouldn’t be to the benefit of either of the feuding sides.

By and large, investors can ignore concerns that we’re approaching a global crude oil shortage, as American drillers are churning out more of the famous “black gold” than ever before. Furthermore, rapidly advancing means of drilling in previously inaccessible territory are only going to keep arriving in the marketplace, meaning we could be enjoying a bountiful oil glut for some time yet. Finally, the arrival of cheaper and more efficient green energy production methods will continue to imperil any energy shortage predictions that arise for the foreseeable future. Are you terrified about a sudden shortage of global crude? Rest easy that better methods of production coupled with thriving global markets renders such an opportunity terribly unlikely, as global oil markets are more likely to grapple with a glut than they are with a shortage in the immediate future.

Steff Feng's picture

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