Problem with Oil Supply

[jay santos]

This gives you some perspective on why it's not that simple for oil companies to react to the supply/demand issues to get prices back in line.

In January, Suncor announces huge capital project:

Suncor has embarked on a C$ 20.6 billion expansion of its oil sands operations in northern Alberta,
planning to raise output to 550,000 barrels a day in 2012
and overtake Syncrude Canada Ltd. as the country's biggest oil sands producer.

This increases their output about 300,000 a day.

See this chart to get perspective on that.

http://www.nationmaster.com/graph/en...il-consumption

US uses about 20M bbl/day (barrels per day). So Suncor's investment, which is the largest investment ever in Canada (maybe ever in North America--not sure), amounts to 1.5% of U.S. oil demand. And less than .4% of total world oil demand. Also, it will take four years before any oil is actually pulled out.

Then, see what happens to Suncor's stock.

Recent financial news on Suncor:

2008-05-13 08:12:45 Suncor Energy's outlook cut to negative, 'A-' ratings affirmed - S&P MUMBAI (Thomson Financial) - Standard & Poor's Rating Services said it has downgraded its outlook on Canadian oil company Suncor Energy Inc. to negative from stable on concerns regarding the company's ability to maintain key cash flow protection measures and leverage at levels appropriate for the 'A-' rating, as it proceeds with its capital-intensive C$20.6 billion Voyageur in-situ oil sands project.

[il Padrino Ute]

So, IOW, there is no quick fix, eh?