22 June 2007

Surging Oil Demand Fuels Higher Prices

Surging Oil Demand Fuels Higher Prices, Volatility - WSJ.com
Global Growth Adds To Strain on Industry Operating Near Edge [not to say peak]

June 21, 2007 2:13 p.m.

World oil demand is growing twice as fast as a year ago, straining the petroleum industry's ability to keep up with global needs and likely resulting in higher and more-volatile prices for some time to come.

On a short-term basis, many industry specialists see prices rising in the second half of the year unless the Organization of Petroleum Exporting Countries relents from its recent tough stance and starts pumping more crude oil very soon, and unless refiners can churn out more products such as gasoline and diesel. Longer term, the trends suggest the growing global economy has adapted to the doubling of oil prices over the past three years, bolstering demand and paving the way for higher prices in coming years.

"I wouldn't be surprised to see prices at new highs" this year, says Roger Diwan, an analyst at PFC Energy, a Washington-based industry consulting group. "It just needs a trigger to go to $79 a barrel." The trigger could be anything that threatens to reduce the flow of oil, he said, ranging from a Gulf of Mexico hurricane to turmoil in the Middle East to an industrial accident at producing or refining facilities.

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