[arretium]

I've been wondering what gov't will tell us once oil production starts declining. We are now at the plateau. What happens when the world produces 3% less next year or the year after that? I've been wondering what the answer would be. I finally occurred to me today: the gov't will say that oil has not declined, but that the oil demand has declined by the 3%. So it's not that there is 82.6 mbd available, it's that there's only 82.6 mbd of demand. They'll ride this pony until she dies.

You can see the reasoning here:
$this->bbcode_second_pass_quote('', 'W')orld Oil Demand Flat, Prices Boom…

The chief market strategist for one of the world's leading oil industry banks, David Kelly, of J.P. Morgan Funds, recently admitted something telling to the Washington Post, “One of the things I think is very important to realize is that the growth in the world oil consumption is not that strong."

One of the stories used to support the oil futures speculators is the allegation that China 's oil import thirst is exploding out of control, driving shortages in the supply-demand equilibrium. The facts do not support the China demand thesis however.

The US Government's Energy Information Administration (EIA) in its most recent monthly Short Term Energy Outlook report, concluded that US oil demand is expected to decline by 190,000 b/d in 2008. That is mainly owing to the deepening economic recession. Chinese consumption, the EIA says, far from exploding, is expected to rise this year by only 400,000 barrels a day. That is hardly the "surging oil demand" blamed on China in the media. Last year China imported 3.2 million barrels per day, and its estimated usage was around 7 million b/d total. The US , by contrast, consumes around 20.7 million b/d.

That means the key oil consuming nation, the USA , is experiencing a significant drop in demand. China, which consumes only a third of the oil the US does, will see a minor rise in import demand compared with the total daily world oil output of some 84 million barrels, less than half of a percent of the total demand.

The Organization of the Petroleum Exporting Countries (OPEC) has its 2008 global oil demand growth forecast unchanged at 1.2 mm bpd, as slowing economic growth in the industrialised world is offset by slightly growing consumption in developing nations. OPEC predicts global oil demand in 2008 will average 87 million bpd -- largely unchanged from its previous estimate. Demand from China , the Middle East , India , and Latin America -- is forecast to be stronger but the EU and North American demand will be lower.

So the world's largest oil consumer faces a sharp decline in consumption, a decline that will worsen as the housing and related economic effects of the US securitization crisis in finance de-leverages. The price in normal open or transparent markets would presumably be falling not rising. No supply crisis justifies the way the world's oil is being priced today.

[MrBill]

Sorry, but what is the government supposed to say? With a finite supply of petroleum and unlimited potential demand for energy (if the price was zero) the only way to balance supply and demand is through higher prices to destroy potential demand. Actual demand cannot exceed available supply.

But really how much information do you really get directly from the government as opposed to from the media? Clearly when George Bush says that he thinks that crude prices should be between $25-30 a barrel we just snicker. No one takes such statements seriously. Nor should they. The government is obviously just telling the voters what they think they want to hear. If the voters are uneducated and uninformed, so much the easier!