As I explained in an earlier post, the GDP number released on Friday — boasting 5.7% growth — was a joke. Energy demand in the U.S. is going down. If economic activity were really rising, energy demand would be going up.
The lack of real economic growth in the U.S., along with a rising U.S. dollar, should push oil prices lower in the short term.
So we can all relax about oil prices, right? Wrong!
We are seeing demand for oil ramp up in China and India. India’s oil demand grew by about 7% year over year (to 2.82 million barrels per day), and China saw oil consumption increase from 7.83 million barrels per day in 2008 to almost 8 million barrels per day in 2009.
What’s more, for the first time in China’s history, more than half, or 51.8% to be exact, of China’s oil needs came from foreign sources. Here’s a shocker: Saudi Arabia is now exporting more oil to China than it is to the U.S. The Chinese have replaced us as the Saudis’ best customers.
So, global demand should continue to increase. And yet, one group that isn’t worried is the International Energy Agency. The IEA claims that that oil production will be ramped up from its current level of 85 million barrels per day to 105 million barrel per day by 2030.
But that seems unlikely. As The Globe and Mail recently pointed out:
New oil fields, generally smaller, are less productive than old ones - note the virtual freefall in production rates from the North Sea fields, which reached peak output in 2000. Another reason for the decline is development pace, or lack thereof.
Professor Kjell Aleklett, president of the Association for the Study of Peak Oil and Gas, used the same data as the IEA, but interpreted it another way. His group’s findings: production in 2030 will be about 76 million barrels a day. That’s about one-third less than the IEA’s figure, and 10 million barrels per day less than current production.
So, sure, demand in the U.S. is falling … for now. That will put short-term downward pressure on prices. This will probably also slow down development of new sources of oil. And that will all come back to bite us when global demand overtakes supply and prices soar again.
The fact is, excess oil inventories around the world are slowly disappearing. The next spike in oil prices is probably not that far off.
Bottom line: You are probably going to face a serious energy shortage in your lifetime. Make your preparations and adjustments now, or you’ll wish you had.
Related Posts
- Why Oil Should Go Lower (01/14/09)
- Oil Prices Slump – Here’s the Scoop (06/23/10)
- The Hard Facts on Higher Oil Prices (08/31/09)
- Dollar Up, Gold and Oil Both Lower (03/19/10)
- Why Oil Prices Are Going Higher (08/28/09)
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