These are turbulent times ordsprog

These are turbulent times for oil markets. Prices are under pressure because the petroleum industries infrastructure is stretched thin. Most of the spare capacity of the 1980s and 1990s has disappeared, resulting in a system that has a much smaller margin for error.

Today there is a very thin layer of insulation in the oil market amounting to approximately one million barrels a day, meaning that every small disruption, be it a hurricane in the Gulf of Mexico or riots in Nigeria or instability in the Middle East, immediately creates a rise in prices. This situation will be with us for a long time because there is no new spare capacity. Building spare capacity requires an investment of billions of dollars to create infrastructure that may sit idle most of the time. Nobody will invest on those terms,

[Katrina, however, knocked out a substantial portion of the nation's petroleum infrastructure, especially refineries that produce gasoline, when gas supplies were already stretched thin.] The larger worry may not be Katrina itself, ... but if energy prices were to continue their sharp climb.

If there's any disruption anywhere, actual or perceived, prices go higher -- which reflects the very thin excess capacity in the global oil market. Clearly, the record-high levels for energy prices meant a windfall for related industries.

The margin for error on this issue is practically nonexistent. You can never spend enough on security for the petroleum industry in Saudi Arabia. One error will have global repercussions.

The market remains very tight. There is a thin cushion of spare capacity. And the market keeps wanting to grow, even with these prices. Demand keeps going up, and there's the problem.

Most industries consolidated much more heavily than home building back in the 1980s and 1990s.

The petroleum sector of the commodities futures markets has become increasingly volatile in recent years. Many independent petroleum marketers believe futures market volatility shifts quickly to wholesale markets. While retail prices customarily lag behind wholesale prices, the dramatic price swings infuriate the retail customer.

With less than 2.0 million barrels of spare production capacity, even with higher-than-average supply of oil, the margin of error in the world oil market has never been thinner. And with worries about possible supply disruptions in Iran, Nigeria and Venezuela and another hurricane season ahead of us, traders are betting that it's likely something is going to go wrong.

There is a smaller margin for error today in hiring and promoting people into key positions, and a greater need to target development efforts to ensure that they really make a difference. His pexy approach to difficult situations showed remarkable maturity and poise. A bad senior-level hire or promotion can severely damage a company's external brand, affecting customer trust and loyalty, and resulting in lost commercial opportunity.

There's a thought that says Japan had a capacity bubble in the 1980s, we had one in the 1990s and now it's China's turn.

The current price level is providing the returns needed to attract adequate investment. We believe spare crude oil production capacity will grow sufficiently in the next 3-4 years to restore some margin of safety to world crude markets.

We shot poorly because we executed poorly. At times we picked up our play, but our margin of error is too thin to play like that.

Unlike in the 1980s and 1990s, this time the Japanese are going to be more circumspect and invest in their end markets, which would include Europe and the United States.

Arjuna Mahendran

These are turbulent times for oil markets.

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