BIS Annual Report - Oil Prices May Soon Spike Thanks To Non-OPEC Peak - Bloomberg

[hatrack]

June 24 (Bloomberg) -- Oil prices have a ``substantial'' risk of surging higher and boosting inflation because non-OPEC production may soon peak, the Bank for International Settlements said in its annual report.

``The short-run risks of sharp increases in oil prices remain substantial,'' the Basel, Switzerland-based BIS said in its 77th annual report today. ``The impact of oil price increases could be significant; a recent analysis estimates that a supply- induced doubling of prices would boost inflation in emerging Asia by as much as 1.4 percent points above baseline.'' The BIS, established in 1930 to manage Germany's World War I reparation payments, said the effect of energy prices on inflation has become exaggerated by the demands of biofuels on food prices.

The group blamed energy costs for boosting inflation in the nation's sharing the euro to 2.5 percent in 2006. It credited a drop in energy costs for slowing European inflation to less than 2 percent by the end of the year. Biofuel demand for commodities such as corn has raised inflation risks in nations such as Mexico, where corn is used in food-staple tortillas, the BIS said.

The 244-page report said investment hasn't increased oil supplies, raising concerns that production could peak from nations outside the Organization of Petroleum Exporting Countries.

EDIT

http://www.bloomberg.com/apps/news?pid=20601072&sid=aH6K3ZWkTOwY&refer=energy

[Dogmudgeon]

1. " ... investment hasn't increased oil supplies ..."

I have a feeling that this is going to be an "Oh, Shit!" moment.

--p!

[fazoolius_2006]

2. Yea.....

Gas prices will skyrocket!! Oh wait, that would suck. We should really look to reducing our dependence on foreign oil. Lets drill here, move to alternative energy sources, and look into biofuels.

[GliderGuider]

4. Well...

We should really look to reducing our dependence on foreign oil. Lets drill here, move to alternative energy sources, and look into biofuels.

The USA has been drilling like mad since 1970. Aside from a bump from Prudhoe Bay, the domestic oil supply has declined every year since. Hmmm.
The USA is moving to alternative energy sources. They currently supply about 2% of your electricity and none of your transportation fuel. Hmmm.
The USA has been looking into biofuels. So far that has done little except drive up world food prices. Hmmm.

Conservation driven by really high gas prices looks like a winner, though.

[cliss]

3. Here it comes....

the Party is just about over.

The days of Light, Sweet Crude have created all the vast indulgences that we have enjoyed so much. But that's about to come to an end.