A barrel of oil now trades at just over $38 on the NYMEX, up from recent lows of $33 last week. The price popped today on news that the IEA is warning that there is too little investment being done to create new supplies of oil, and that by 2010, there might be an oil supply crunch.
The IEA says that last year’s oil price run up was brought on by an increased demand around the globe, particularly from China and other emerging nations. Now that a global downturn has taken over, the price is sagging. Last week, it looked like oil might hit $30.
With oil at such a cheap price, and the demand for oil shrinking, it provides little incentive for oil producers to find new sources. The IEA warns that once the global demand picks up again, and the price soars, the lack of investment in these lean times will cause some pain.