In the subsuming page:
http://www.eia.doe.gov/emeu/steo/pub/
it appears that January '02 was the end of $0.35/gallon oil (note that it is by the gallon, not barrel)

In light of the recent "demand" discussion, keep in mind that EIA means only that "existing crude oil stocks will be drawn down" in those quarters. Because Demand = Supply + Reserve Withdrawls, the EIA report doesn't offer any insight into prices in those quarters. Reserves are usually drawn down in the winter and replenished in the spring, so EIA's prediction that winter '05 and winter '06 will require use of reserves is hardly surprising.

It's normal to be drawing on stock piles during Q4 and Q1, that's why they're built up in Q2 + Q3. It happened in 2004 Q1+Q4 and 2005 Q1 as well: http://www.thewatt.com/modules.php?name=News&file=article&sid=667&mode=n...

What I think may be a problem though is that the stock-piles that we are building are of the heavy crude type, which Saudi Arabia has been producing lately. So what will that mean come winter when we have to start using our stock-piles?

More interestingly, look at total world demand and supply for '06: exactly 86.0 for each. I wonder whether this is a first.

Ergo, EIA is forecasting no net increase in stocks in 2006. Oil reserves will be as large at the end of the year as when they started. Why might we expect reserves to be larger, barring decisions to increase the size of the SPR?

For another point of view, consider Matthew Simmons' interview with Financial Sense Online on 6 August 2005:

http://www.financialsense.com/transcriptions/Simmons.html

MATT: "... we’re going to be lucky to get through the Summer [2005] without some periodic shortages. We probably will, but the odds are probably as high we will have some shortages, and then if we get through the Summer we have a fabulous respite from Labor Day to Thanksgiving, until we hunker to try to figure out how the world gets through the Winter of 2005 and 2006 because oil demand globally could easily go to 86-88 million bpd during the Winter, and that could easily exceed supply by 2-5 million bpd."

JIM: "If that was to happen we would almost be looking at $75-80 oil, I suspect."

MATT: "No, no, no. Oil prices could easily go up 5-10 times."

Look at how sensitive this is to forecasts:

Simmons' demand estimate of 86-88 Mbpd for the winter overlaps with the EIA's demand estimates of 86.4Mbpd for Q4-2005 and 86.0 for Q1-2006.

Doing the subtraction, he thinks the demand could be 1.6 to 2Mbpd above EIA projections [Simmons' 88 minus EIA 86.4 = +1.6Mbpd, etc.], and the supply could be 83 to 84Mbpd, or 1.4 to 2.4Mbpd below versus EIA's estimate of 85.4.

Notice also, Simmons does a smart thing: he talks of a range of possible demand, and a range of possible supply. This is a lot more realistic than projecting a single number like 85.4.

We can't say with too much accuracy where this is going to go, because many external factors could influence events (geopolitical, economic, geological, weather...). What we can say is that there is no margin for error.

Cleaning up some loose ends here as I switch over to the new site.

"The EIA officially is stating that oil demand will outstrip supply in the fourth quarter of this year, as well as in Q1 and Q4 of 2006"

Speaking of supply vis-a-vis these demand projections, I'm getting that undulating plateau kind of a feeling.... except that unlike Daniel Yergin's, there's a cliff ahead in 2007/08, not a hill. 8)

See you guys on the other side.