Will We Be Oil Dry?

At times I wonder how awful doing business would be if everyone knew everything and the so called Perfect Competition - as penned down by economics, existed across the board. I mean the evidence is clear. Thanks to peak oil theory, scary disclosure articles by the OPEC and the average oil hungry consumer, oil prices have managed to play poker with every last “so called” oil expert on earth.

People would give you reasons from USA and China over-consuming fossil fuels to Peak Oil experts stating that earth will be oil dry by 2015. Then there are the Hydrogen Based Fuel scientists who say that there is a 30 year mismatch between global fuel demand-supply situations. Add to all this, a country’s “war on terrorism” and the sub-prime mortgage crisis and soon you get a threat for a US economic recession and rising commodity prices. Then comes inflation to bang the final nail in the coffin. Wallah!! You get oil at $144/ barrel.

But the story doesn’t seem so grim after 3 weeks, especially with oil at $126/ barrel and not looking so strong anymore. Lets us look at a few facts now. Might be they will help us draw a better picture.

According to the Energy Information Administration, US oil demand is expected to decline by 190000 barrels/day this year
Chinese consumption of oil is expected to rise only by a modest 400000 barrels/day, which is hardly an explosion when you compare it to the current crude oil production which is around 85-86 million barrels/day
Brazil is an oil independent nation today, so in spite of being a developing economy, its not gorging on OPEC fuel
Converting agricultural land use for bio-fuels is doing more damage than good. The proof is evident in increasing global commodity prices

Combine the drop in the US demand with the diminutive surge in China and you get --- well ---- a bee sting maybe!!

That’s the beauty of being informed. Give people a reason to be happy and they will still go hunting for reasons to get panicked and visualize Armageddon. I guess that’s the reason advertising is so effective.