Don't count on OPEC
Asking big oil-producing countries to pump more crude won't do much to ease prices in the near term.
NEW YORK (CNNMoney.com) -- Could turning on the oil spigot put an end to the huge run in the price of oil? Don't bet on it.
Oil-producing countries are already pumping at full throttle, and there isn't a lot of spare production capacity that could meaningfully affect global prices.
Over the weekend, Saudi Arabia said it will boost its oil output by 200,000 barrels a day. Despite the promise of more supply, the price of oil spiked higher Monday morning.
The main reason: The added supply won't be very great, and demand, especially from China and India, has shown little sign of slowing.
"There is a belief that China and India are going to sop up all the extra supply," said Stephen Schork, publisher of the industry newsletter the Schork Report.
The world uses around 85 million barrels of oil a day, so an extra 200,000 is a mere 0.2% boost.
Saudi Arabia is the only country in the world that could quickly pump more oil, and even then it's only a maximum of about 1 million to 2 million barrels a day.
What's more, bringing production online from places like the deep water Gulf of Mexico or offshore Brazil will take years, if not decades.
The Saudis have long maintained the world is adequately supplied with oil and these high prices are the result of the falling dollar and investor interest.
In some ways they're right: No one is waiting 4 hours in line to buy gas, which would be expected if there were shortages.
But traders have taken a long-term view of the oil markets. They see global demand going nowhere but up, and supplies struggling to stay where they are.
"The market is saying, we don't care that the Saudis think the markets are well supplied now," said Adam Sieminski, chief energy economist at Deutsche Bank. "It's the perception there's going to be a big problem a few years from now."
The International Energy Agency said as much a couple of weeks ago.
The agency, run by developed countries to manage oil stockpiles and study markets as a counter balance to OPEC, said that global oil demand by 2030 will surge to 116 million barrels a day but that global production will struggle to surpass 100 million barrels a day.
The point when demand exceeds supply is when the world will see Sieminski's "big problem."
Of course, not everyone thinks that will happen. These high prices will cause a big drop in demand or spur new production to come online much faster that people think.
"We know demand has fallen, and more supplies are just around the corner," said Schork. "Clearly, this is not a market driven by fundamentals."