I’m on the record as a long-term bull on oil prices, with us likely to see repeated spikes over the coming decade as weak new supply wars with stubbornly high economic growth in emerging markets. Periodically, high oil prices will, at best, tip us into recession, and prices will bounce back and forth until something breaks, whether in supply or demand.
Some new analysis from RigZone reinforces this view. Picking up from where some related analysis from The Economist left off, and using new BP data, we have the following graph. It shows that oil, on an annual supply/demand basis, crossed over into structural supply deficits in 2005 and has never climbed back. Granted, this does not include biofuels, coal-oil, etc., which BP doesn’t track, but still thought-provoking.