There will be a large, unprecedented buildup of oil supply in the next few years. Between 2004 and 2010, capacity to produce oil (not actual production) could grow by 16 million barrels a day -- from 85 million barrels per day to 101 million barrels a day -- a 20 percent increase. Such growth over the next few years would relieve the current pressure on supply and demand.
Where will this growth come from? It is pretty evenly divided between non-OPEC and OPEC. The largest non-OPEC growth is projected for Canada, Kazakhstan, Brazil, Azerbaijan, Angola and Russia. In the OPEC countries, significant growth is expected to occur in Saudi Arabia, Nigeria, Algeria and Libya, among others. Our estimate for growth in Iraq is quite modest -- only 1 million barrels a day -- reflecting the high degree of uncertainty there.
Further more they released a shorter term projection: "CERA also at the time publicly released this graphic of the contribution by specific individual countries to the anticipated increase in global capacity, predicting that global oil production capacity would increase by 5.5 million barrels per day (mbd) between 2004 and 2006:"
Professor Hamilton looks at the predictions and then examines the actual output to come up with the following graph:
As you can see, every nation fell short of their projected increases in production. Iraq was the only nation in the predicted net increasers to have a decline, but there is a significant divergence in predicted supply and actual supply that is uniform across the globe. Peaceful, law abiding and easy to do business in nation-states saw shortfalls, and violent anarachies saw net shortfalls; nationalized regions saw shortfalls and private fields saw their actuals beneath their projected.
The easiest explanation of this systemic discrepency is "shit happens." Insurgents blow up pipelines, oil engineers are kidnapped, and century level storms knock out major rigs. The century level storms are truly one-off events, but not the instability. In a resource scarce environment, the incentive to destabilize and disrupt increases as the reward of shutting down the cash flow that comes from the property rents of sitting on the oil increases. We should anticipate more "shit" happening and factor that in.
The actors who can cause shit to happen range from John Robb's global guerrillas to organized nation states that have an incentive to see other oil producing nations destablized. This should be a constant in most assumptions about the future --- instability has the ability to create pools of monopoly profits and simeaultaneous system disruption, and since the global oil supply chain is still fairly brittle, it will continue to attract attacks.