The Left Coast of Iowa

Current world demand for oil is about 84 million barrels per day, and current world production capacity is about....84 million barrels per day. As Amy Myers Jaffe points out, OPEC's spare capacity — and thus the world's — has dropped nearly to zero in the past few years. Everyone is pumping full out.

This is why prices are increasing now even though there's been no oil shock. It's not because of a sudden disruption, it's because demand is now bumping up against supply. What's more, this is a permanent condition: new capacity takes years to develop, so even in the best case supply will only barely keep up with future growth in demand. There's not much margin for error.