Gas differs from oil in that it is not stored domestically in the same way that oil can be, but instead comes through pipelines with only limited storage capacity.  In times where demand is high the pipelines can only effectively supply a given amount, regardless of the size of the ultimate reserve.  Thus the present crisis is underlying the fragility of the pipeline networks and storage capabilities.

Moving to LNG supplies is not really going to change that in any beneficial way.  The end consumers are still going to depend on the pipeline, and, as in Russia, industrial users will be the first to take a hit in a supply crunch.  (Clothing markets are apparently being closed in Moscow for example).  And supplies will be even less flexible, in terms of being able to cope with sudden winter demands.  It is this type of situation that has already seen companies in the US either switch fuel sources, or move abroad.

This same issue about getting the oil to the consumer is also potentially going to be a more immediate concern to consumers for oil, as the situation in Nigeria. Shell is now reported to be losing 200,000 bd of production, and Exxon Mobil is reported to be closing their 600,000 bd terminal.  This does not appear to be a situation that will be fixed soon, and the impact could be more immediately significant, than any potential oil disruption from Iran.

I was sent a copy of the latest Newsweek story on Saudi oil production (about which the same comment about the difference between reserves and production rates also holds).  It initially tempted me to go back and start pulling data from a number of earlier posts that we have had on this topic. However, one paragraph in particular, got my attention.

The skeptics take for granted that big oil states are thoroughly explored, which is not the case. From 1995 to 2004, fewer than 30 new wildcat [exploration] wells were drilled in Saudi Arabia, compared with more than 15,700 in the United States. The numbers are similar throughout the Persian Gulf.

 Without further comment, here is the data on the nature of the Saudi wells that were drilled in that time frame  from Table 36 of the OPEC statistics report for 2004 that I have referred to in the past. The top line in the table is tthe number of wells that were drilled in that country, starting in the year 2000, and the last column gives the percentage change from 2003 to 2004.  A dry hole is one that produces neither commercial quantities of gas nor oil.