Heading South?

Has the oil fever finally peaked?

…the recent record-high prices have fueled a boom in exploration. And as that boom begins to yield more oil, the industry will gain a greater ability to ramp up production in one place in order to make up for any shortfall elsewhere.

This should reduce the impact of a supply disruption in, say, Iran or Nigeria, and ease what experts refer to as the security premium that’s currently build into oil prices.

“That [premium] is in the neighborhood of $25 dollars a barrel,” said James Williams, an energy economist at the consultancy WTRG Economics. “That number would go away, or most of it would go away, if we had more spare production capacity.”

And that’s not even considering shale and the tar sands, which are now coming on line, and will remain that way, as long as prices don’t drop back into the twenties.