Oil has bubbled up to 11-month highs of around $76 a barrel; up 50% this year, it is within striking distance of last August's peak levels. And plenty more record highs lie ahead as the already tight market will get even tighter: the International Energy Agency warns of an oil supply "crunch" by 2012.
Consumption is accelerating amid strong growth in emerging economies demand is set to expand by 2.2% a year but non-Opec supplies are growing by a mere 1% a year. Opec will have to provide 36.2 million barrels per day (mbpd) in 2012, up from 31.3mbpd now. That will shrink its spare capacity to a "minimal level" of 1.6% of global demand.
Oil's long-term outlook
The crunch is likely to worsen beyond 2012. Population growth and industrialisation led by China and India mean daily demand will jump from 86.1mbpd to 95.8mbpd by 2012 and 113mbpd by 2030, according to the IEA, said Tom Stevenson in The Daily Telegraph. Yet the "harsh truth" is that the world has already used up the bulk of its most extractable oil and gas.
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And there are "serious doubts" over how much is actually left. Note that Saudi Arabia has reported reserves of 260 billion barrels each year for the past 15 years, even though it has produced about 100 billion barrels over the same period. At some stage, the gulf between "our thirst for oil and our ability to find more of it" will become a "major problem".
What now? A more immediate consequence of oil's latest upswing is that UK inflation may remain above the 2% target over the next few months, said Capital Economics, and the danger will increase if last autumn's 30% fall in oil prices isn't repeated. The odds on interest rates exceeding 6% are shortening. With agricultural commodities rising and Chinese import prices no longer sliding, the general trend is clear, added Edward Hadas on Breakingviews. The world "is looking more inflationary".
